EXCLUSIVE: Australia on Brink of Gas Crisis as Government Rushes to Unveil Reservation Plan by Christmas
- East coast gas supplies could fall short of demand from 2028, despite sufficient reserves and resources for the next decade
- Gas prices have tripled, pushing up power prices and threatening energy-intensive industries with closure
- The Albanese government is finalising a gas reservation scheme to force exporters to boost supply to the domestic market, with ministers grappling with concerns over price relief
Australia is staring down the barrel of a gas crisis, with the federal government racing to unveil a gas reservation plan by Christmas in a desperate bid to avert shortages and bring prices down. The Albanese government has been working behind the scenes to finalise the design of the scheme, which would force exporters to set aside gas for Australian use.
Ministers are grappling with concerns that the plan may not bring down prices as much as hoped, with some experts warning that gas prices may never return to previous lows. The Australian Workers Union is pushing for the government to have the power to set prices for industrial users, while others are warning that the scheme could have unintended consequences.
Former WA premier Alan Carpenter, who introduced a gas reservation scheme in Western Australia in 2006, has warned that Australia is becoming a “laughing stock of the energy-producing world” due to its failure to reserve gas for domestic use. “The whole east coast of Australia is facing gas shortages, consumers are suffering, and it should never ever have happened,” he said.
The government’s plan is expected to be unveiled by Christmas, with design work set to begin in the new year. The scheme is likely to involve forcing exporters to boost supply to the domestic market, with the nominal figure or percentage of production to be determined through more detailed design work.
The LNG industry is broadly supportive of the plan, but there are concerns over the timing and the impact on existing contracts. Santos’s GLNG joint venture does not currently supply any gas to Australia and is instead buying gas from the domestic market to fulfil its export contracts.
Industry insiders predict that the government will impose domestic supply obligations on Santos once its existing contracts expire in the early 2030s. In the short term, Santos’s GLNG could be forced to boost domestic supplies by offsetting the gas it is currently buying from the Australian market.
The government is keenly aware of sensitivities among Australia’s trading partners and is working to ensure that the scheme does not unduly penalise or burden any particular state or territory. However, the Queensland government is not enthusiastic about the idea of a gas reservation scheme, citing concerns over the impact on the state’s petroleum royalties.
As the government rushes to unveil its plan, experts are warning that the consequences of inaction could be severe. “The alternative is that you can’t afford to buy your own gas and so you end up importing it from somewhere else,” warned Mr Carpenter.
Eastern Australia could soon be importing gas from interstate and overseas, with Victoria developing two LNG import terminals and iron ore magnate Andrew Forrest building a $1 billion terminal at Port Kembla. The company has told the government’s review that it is “positioned” to start supplying gas to the east coast from 2027.