Australia’s opposition leader Peter Dutton has said a Coalition government would introduce a gas reservation scheme, in a move that places energy policy firmly at the centre of the country’s upcoming general election on 3 May.
Under the proposed policy, gas companies would be required to divert more gas to the Australian market, rather than sell it overseas. Around 80% of Australia’s gas is exported.
A Coalition government, if elected, would invest A$1bn into a critical gas infrastructure fund, increase gas pipeline and storage capacity and prevent gas companies from delaying drilling offshore gas fields.
But energy majors are pushing back, saying more intervention will hamper gas supply development. Potentially affected operators include Shell Australia, which exports gas from the Queensland Curtis LNG project (8.5 mtpa), and Australia Pacific LNG, operated by ConocoPhillips.
According to Dr Wesley Morgan, Research Associate at the Institute for Climate Risk and Response at the University of New South Wales Sydney, said such a gas reservation policy may create friction with buyers of Australian gas, such as Japan.
Australia supplied 43% of Japan’s liquefied natural gas in 2022. Japan has previously expressed concern about the federal government moving towards diverting Australia’s gas supplies for domestic use, saying it could threaten long-established trade practices and future Japanese investment.
“However, contrary to Japan’s claims, Australian gas is not needed to keep the lights on,” said Morgan. “Gas use in Japan is falling. Today, Japan on-sells more gas to other nations than it imports from Australia.”
He believes Dutton’s plan to expand gas production is a folly.
“No new gas projects are needed to meet Australia’s energy needs. The best way to cut energy prices is to accelerate the shift to the cheapest form of energy – which is from wind, solar and storage.”
But Josh Runciman, Lead Analyst, Australian Gas at independent think tank the Institute for Energy Economics and Financial Analysis, said governments and energy agencies should look at diverting LNG exports into the domestic market. The Australian Competition & Consumer Commission forecasts a gas surplus for east coast Australia in 2025 but warns of potential shortfalls by 2027.
“Global LNG markets will soon see an unprecedented glut of new low-cost supply. In this context, redirecting gas for domestic use would have minimal impact on LNG exporters. And it would offer the opportunity to resolve the east coast supply issue, ensuring we retain gas-intensive manufacturing jobs and skills,” he said.
Continued calls for new gas production have not altered the likelihood of future supply gaps in the east coast market in Australia.
“Fortunately, however, there are many other things we can do to improve the supply-demand outlook and mitigate the risks of supply gaps. These options are likely to be lower cost, with lower emissions.”
