Exporter warning over gas shortfall

Australia’s major exporters of liquefied natural gas will today be given formal notice that the government is considering whether 2018 will qualify as a ‘gas shortfall year’.

Australia’s major exporters of liquefied natural gas will be given formal notice today that the government is considering whether next year will qualify as a “gas shortfall year,” allowing it to interve­ne in the market to shore up domestic supply.

Resources Minister Matt Canavan will warn LNG exporters today that he is seeking inform­ation on whether or not to intervene using the Australian Domestic Gas Security Mechanism, which was introduced on July 1.

A final decision is expected to be made by October, with Sen­ator Canavan to consult with the Australian Energy Market ­Oper­ator, Australian Competition & Consumer Commission, and major gas users and producers to assess whether there will be sufficient supply to meet deman­d next year.

“The ADGSM is a mechanism of last resort to be applied in accordance with our inter­national trade obligations and will only be used if there will not be a sufficient supply of gas for Australian consumers,” Senator Canavan said.

“The mechanism will balance domestic gas market considerations with the operational and planning requirements of a global­ly integrated and highly competitive export industry.”

Senator Canavan said he was committed to working closely with gas suppliers to see if they could show that demand would be sufficiently met, as part of a genuine consultation process ­before any decision was made on whether to proceed with export restrictions.

The Turnbull government is urging the states and territories to ease some restrictions on onshor­e development, with Victoria having banned unconventional gas development and im­posed a moratorium on conven­tional gas exploration until 2020.

The Northern Territory has also imposed a moratorium on hydraulic fracturing while it conducts an inquiry, following which it will either ban the practice or allow it in highly regulated and prescribed areas.

International Energy Agency head Fatih Birol has also sounded the alarm on Australia’s gas market, saying there is a need to devise a “long-term fix” to encourage supply and lower prices.

The IEA, which Dr Birol has run for nearly two years, found it was an indicator of Australian “market failure” for domestic prices to exceed export prices. It also warned that the situation was only “exacerbated” by restrictions­ on both unconventional and conventional gas by some state governments.

Dr Birol told The Weekend Australian that lifting gas restrict­ions would allow nations such as China and India to use more Australian gas as a replacement for coal and deliver “tremendous benefits to our fight in global warming”.

Energy Minister Josh Frydenberg has turned up the political heat on Bill Shorten to do more to encourage the Victorian Labor government of Daniel Andrews­ and the Northern Territory government of Michael Gunner to lift moratoriums.