Government agreement with gas companies on domestic gas supplies. – October 2017

Filed under: Politics, Australian Politics, Trade and industry, Energy,

After the latest meeting between the federal Government and the heads of the three big east coast gas exporters, Prime Minister Malcolm Turnbull says the companies have given commitments to ensure that the east coast gas market will be supplied.

“So the domestic gas shortage about which we were so concerned will not arise,” Mr Turnbull said.

Addressing the representatives of Santos, Origin and Shell, he said: “The commitment which you’re making today is to offer sufficient gas to meet the expected shortfall and any emerging shortfall through the good faith offering of gas to the domestic market on reasonable terms.

“These commitments are vitally important to ensure Australian jobs and to ensure Australians have affordable and reliable energy, including electricity - gas being a more important fuel than ever in the generation of electricity.

“I want to thank you very much for those commitments and by ensuring that there will not be a shortfall of gas next year, that means we will not be required to place restrictions on exports.”

The meeting with gas industry chiefs came after separate reports by the energy regulator and the Australian Competition and Consumer Commission warned of a shortfall of between 54 petajoules and 107 petajoules along the east coast over the next two years.

During the meeting Origin Energy, Santos and Shell agreed to sell 54 extra petajoules into the domestic market via contract for 2018, and more if needed.

Mr Turnbull said beyond 2019 the gas companies had also agreed to offer domestic customers any uncontracted gas as a priority, before it was sold into the international spot market.

Importantly, he said, the companies also agreed to report regularly to the ACCC to ensure greater transparency. They will have to report on sales, offers to sell gas and bids to buy gas from customers that they have declined. “We will shine a light on what has been a very opaque industry and that sunlight will ensure more gas at better prices for Australians,” he said.

It was an investigation by the ACCC that helped reveal the size of the shortfall and force a solution.

“They have given us a guarantee that they will offer to the domestic market the gas that was identified as the expected demand shortfall by AEMO in 2018,” he said. “They stated that they will provide a similar guarantee over two years, that’s their intention, and will respond further in more detail on 2019 when we meet again next week,” Mr Turnbull said.

“They’ve stated that they will offer first, as a first priority, domestic customers any un-contracted gas in the future as a priority.

Zoe Yujnovich, chair of Shell Australia, said: “We appreciate the constructive dialogue that we’ve had.

“There have been some difficult and tense moments and we appreciate the challenge that you’ve given to us.

“We hope that through the Heads of Agreement, indeed we can find a path forward to make sure that the domestic market is serviced and that indeed there is enough available gas for the market, which we stand behind and are committed to deliver.”

But Mr Turnbull has also launched a fresh attack on the NSW and Victorian governments over their bans on onshore gas development.

He said Victorian customers paid an 11 per cent premium on their gas bills and NSW customers an extra 5 per cent because of the cost of shipping gas south from Queensland.

He reserved his strongest words for Victoria’s Labor government. “‘Victoria has got plenty of gas. There is plenty of gas in Victoria, onshore gas in Victoria,’’ he said.

‘‘The only obstacle to getting it out is the Labor government. The idea that Victorians are going to have to pay the cost of shipping gas from the Middle East or from Louisiana or from north-west Australia because they have a government that is not prepared to access the gas resources in Victoria is extraordinary,’’ he said.

Further Reading