The Turnbull Government has announced new restrictions on gas exports which aim to secure domestic gas supply.

Mr Turnbull said the shortage of domestic gas supplies has resulted in dramatically higher prices in Australia – higher than prices paid in the markets to which Australian gas is being exported.

“By ending the shortage, and ensuring the domestic market has adequate supplies, we will ensure gas prices in Australia are lower and fairly reflect international export prices as they should.

“Australians are entitled to have access to the gas they need at prices they can afford.

“Thousands of jobs depend on secure, reliable and affordable gas.”

The Turnbull Government sought commitments from the gas industry, at meetings on 15 March and 19 April, that each east coast LNG exporter would be a net contributor to the market.

Mr Turnbull said while progress has been made, these requirements have not been met.

“It is unacceptable for Australia to become the world’s largest exporter of liquefied natural gas, but not have enough domestic supply for Australian households and businesses.”

To combat this, the Turnbull Government is introducing the Australian Domestic Gas Security Mechanism which will give the government the power to impose export controls on companies when there is a shortfall of gas supply in the domestic market.

“Gas companies are aware they operate with a social licence from the Australian people. They cannot expect to maintain that licence if Australians are shortchanged because of excessive exports.

“The Australian Domestic Gas Security Mechanism will ensure gas supply in Australia always meets the forecast needs of the local market.”

The Minister for Resources, in consultation with relevant ministers, will impose export controls based on advice from the market operator and regulator.

If an exporter is not a net contributor to the domestic market, that is, they draw more from the market than they put in, they will be required to outline how they will fill the shortfall of domestic gas as part of their overall production and exports.

The Government will not prescribe how the exporter must respond, giving companies considerable flexibility in finding commercial solutions – such as swapping cargoes out of portfolios or on the spot market.

LNG exporters who are drawing from the domestic market will be ordered to limit exports to ensure local supply.

Those exporters which do not draw more from the domestic market overall, will be licensed to export according to their forecasts.

Mr Turnbull said securing supply in the domestic gas market will put downward pressure on retail prices in Australia.

“The Government remains committed to LNG exports but not at the expense of Australian interests.

“This action is expected to apply only to east coast exporters and will comply with our international obligations.”

The Government expects the decision to be a targeted temporary measure of repair to restore certainty to the market during this time of transition.

The long term goal remains boosting the supply of gas by removing state restrictions on exploration and development.

This is the third part of the Turnbull Government’s actions to deal with the gas crisis.

Together with the Australian Competition and Consumer Commission’s forensic monitoring of the entire gas supply chain, and the reforms to the pipeline and gas markets, the gas security mechanism will secure adequate and affordable gas and give confidence to continue investing in our LNG sector.

APPEA has responded to the announcement of the mechanism and said the sas export controls are a short-term measure that risk exacerbating tight market conditions unless accompanied by genuine reforms.

APPEA Chief Executive Malcolm Roberts said, “Restricting exports is almost unprecedented for Australia.

“The industry will need to carefully consider the details of the Commonwealth announcement.  There is a very short consultation period.

“However, governments must address the real problem – a lack of supply created by high regulatory costs and political barriers. With exploration at a 30-year low, the pipeline for future supply is precarious.

“The only way to ensure long-term energy security is to remove restrictions and make it possible for explorers to find new gasfields and producers to develop these resources.

“The only solution is more gas, not more regulation.”

Santos also released a statement on the new restrictions, “Moving forward Santos will supply more gas into the Australian domestic market than it purchases for its share of LNG exports.

“Santos will work collaboratively with Government and its joint venture partners to ensure an outcome in the best interests of its shareholders.” 

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