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Govt secures more domestic gas for east coast

21st January 2021

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – The Australian government has inked a new heads of agreement with east coast liquefied natural gas (LNG) companies that will ensure more gas is offered to the domestic market, more often, and on more competitive terms.

The agreement, signed by Prime Minister Scott Morrison and LNG exporters Australia Pacific LNG, Queensland Curtis LNG and Gladstone LNG will help secure competitively priced gas supply for the east coast market at least until 2023, the government said on Thursday.

Morrison said cheaper and more reliable energy was central to Australia’s economic recovery and the government’s JobMaker plan.

“Gas is critical to our economic recovery and this agreement ensures Australian businesses and families have the gas supply they need at the cheapest possible price.

“This is about making Australia’s gas work for all Australians, while also supporting economic growth and backing important regional jobs in our expanding LNG sector.

“As part of our JobMaker plan we are delivering more Australian gas where it is needed at an internationally competitive price, this particularly includes manufacturing businesses, who employ more than 850 000 Australians, many of which rely on gas to operate,” the Prime Minister said.

Minister for Resources, Water and Northern Australia Keith Pitt said the new heads of agreement puts Australian families and businesses first by making sure Australia does not experience a shortfall in supply at the expense of exports.

“The government remains committed to delivering lower energy prices, and to make sure all Australians benefit from increased supply and reliability. The strengthened heads of agreement commits LNG exporters to offer uncontracted gas to the domestic market first, on competitive market terms, before it is exported.

“It complements the Australian Domestic Gas Security Mechanism which also references the Australian Competition and Consumer Commission (ACCC) LNG netback price series.

“Both the Australian Energy Market Operator (AEMO) and ACCC have found east coast of Australia has a low, but increasing, risk of facing a gas shortfall. We are working to get the right balance between affordable gas for manufacturers and a price that encourages new gas resource development,” said Pitt on Thursday.

“I want to also acknowledge the success of our LNG export industry, especially here in regional Queensland. It has brought jobs and opportunity to many regional communities in central and southern Queensland and put money in the pockets of farmers who are hosting the gas wells on their farms,” Pitt added.

The Australian Petroleum Production and Exploration Association (Appea) noted that the new agreement extended the existing commitment that uncontracted gas (spot cargoes) will not be offered to the international market unless equivalent volumes of gas have first been offered with reasonable notice on competitive market terms to the Australian domestic gas market.

“Individual prices offered to domestic gas users will continue to be internationally competitive and have regard to the producer’s cost of supply and factors that may be relevant to users’ individual circumstances, including the terms and conditions of their gas supply agreement and any applicable transportation or retailer charges,” Appea CEO Andrew McConville said, pointing out that both the ACCC and the International Gas Union had confirmed that Australian domestic gas prices are lower than prices paid by Asian customers for Australian gas.

McConville said the industry appreciated the common-sense approach of the government in working with industry to finalise the heads of agreement through to January 1, 2023.

“The approach taken to recognise the realities of the gas market on the east coast will deliver competitive gas supply outcomes for customers and continue to encourage more investment in new supply by producers.

“This is the best way to ensure the lowest possible prices for customers. This is evidenced by the fact that the Queensland LNG industry, an investment of around A$70-billion made possible only by the scale of international contracts, also delivered more supply and competition in the domestic market.

“The east domestic market, including the southern states, has benefited from these developments with the gas flowing from these developments providing us with the benefit of export income as well as domestic gas supply.

“The heads of agreement reflects our sector’s ongoing commitment to the domestic market but importantly recognises the investment scale afforded by international contracts.

“The answer to ensuring competitive gas prices in Australia on an ongoing basis is more supply and more suppliers – and developing gas resources closest to local markets.”

Pitt noted that the government is also continuing with its commitments to unlock new gas supplies through the Strategic Basin Plans with the Beetaloo Basin Plan finalised and work progressing on unlocking gas in the North Bowen and Galilee basins.

The federal government previously announced a commitment to provide up to A$50-million for exploration that occurs before June 30, 2022 in the Basin along with A$173-million for road upgrades to support the development of a gas industry based on Beetaloo gas resources.

“The Beetaloo has the potential to mirror the US shale gas revolution – bringing jobs and investment to the North while providing secure and affordable gas supplies to industry,” Pitt said.

“The Australian government will continue to work with relevant regulators and energy market bodies, including AEMO, ACCC, Australian Energy Market Commission and the Australian Energy Regulator, to build on reforms which improve the functioning of the east coast domestic gas market.

“This includes establishing an effective Gas Hub at our most strategically located and connected gas trading hub at Wallumbilla in Queensland to deliver an open, transparent and liquid gas trading market.”

Edited by Creamer Media Reporter

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