Origin-backed LNG exporter urges overhaul of east coast gas market

Australia’s largest gas exporter, APLNG, has slammed ‘band-aid’ market fixes, demanding reforms that include stopping companies buying domestic gas for export.

APLNG, backed by Origin Energy, produces more gas than it exports.

One of Australia’s largest gas exporters has urged a sweeping overhaul of the gas market, slamming a series of patchwork fixes as the national cabinet prepares to review new rules for the east coast market.

In his first public interview on the issue, Australia Pacific LNG chief executive Dan Clark told The Australian that the east coast market’s chronic pressures cannot be solved with the series of band-aid solutions that have been applied over recent years.

The call comes as the federal government prepares to unveil new rules for the east coast gas market, with a cabinet meeting expected this week and a policy announcement likely before Christmas.

Mr Clark said enduring reform must start by curbing the ability of Gladstone LNG, in which Santos is the largest shareholder, to purchase domestic gas for export as liquefied natural gas.

“When we consider the situation with concerns about domestic supply, it’s clear this has arisen from a series of policy decisions at both state and federal levels over the last few years,” Mr Clark said.

“The current regulatory settings aren’t encouraging the development of additional supply. That’s the first problem. The second is that unmitigated purchases from the domestic market continue to be exported. That combination has created a lot of stress in the system, and major concerns about both supply and pricing.”

Mr Clark concluded in blunt terms: “If you are going to export, you should first have to contribute to the domestic market.”

Origin Energy-backed APLNG has long been a leading voice for the introduction of a domestic reservation scheme that would tie the capacity of east coast LNG exporters to sell cargoes overseas to their contributions to the domestic market. GLNG is the only one of the three major east coast LNG exporters that does not produce enough gas to meet its export contracts, instead relying on purchases from the local market.

Santos has sought to push back against such measures, warning that restricting its capacity to buy domestic gas could jeopardise energy security for Asian buyers, including China, Japan and South Korea, all of which rely heavily on Australian LNG.

Analysts say any limitation on supply would be politically sensitive and could have far-reaching implications for bilateral trade, which runs into billions of dollars.

Mr Clark said those concerns were overstated.

“The government can design a scheme that allows GLNG to purchase its shortfall from other producers,” he said. The Australian has previously reported that Labor is leaning towards a mechanism that would let GLNG buy credits from other exporters, such as APLNG and Shell-backed Queensland Curtis LNG (QCLNG).

Proponents insist such a system would let GLNG meet its contractual obligations, though at a significant cost.

To bolster its case, APLNG commissioned modelling from Energy Edge to quantify the potential benefits of reform. The research found that increasing east coast supply from roughly 150 petajoules (PJ) to 180 PJ over the next three years could lower average gas prices by around $2 per gigajoule – a drop of 18–20 per cent across NSW, Queensland, and Victoria.

The exporter warned, however, that these savings would never be realised if domestic gas continues to be purchased and re-exported through trading arms linked to major LNG producers.

For the Albanese government, struggling to convince voters that its energy transition will deliver lower bills, cheaper gas could be politically appealing. Manufacturers have repeatedly said sustained high gas prices are eroding their competitiveness and threatening their viability.

Gas-fired power stations remain critical to the grid as so-called “peakers,” generating electricity when demand spikes or renewable output falls short.

But because gas generation is expensive, high prices are often reflected in household electricity bills. Under a proposed export permit scheme, APLNG would likely face reduced domestic obligations, allowing the exporter to boost its LNG shipments overseas – a fact that GLNG has privately emphasised. In contrast, GLNG has advocated a scheme that would restrict excess cargoes from APLNG and QCLNG while promoting measures to encourage additional domestic production.

APLNG insists a co-ordinated approach is overdue and it has produced public polling that indicates strong support for a domestic reservation. Research by DemosAU found that 82 per cent of Australians back such a measure, with nearly three-quarters believing it should be implemented immediately and applied uniformly across all exporters, without exemptions.

The debate highlights the ongoing tension between securing affordable gas for domestic consumers while fulfilling export contracts that underpin Australia’s multibillion-dollar LNG trade – a balancing act that will define the east coast energy landscape for years to come.

Originally published as Origin-backed LNG exporter urges overhaul of east coast gas market