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Australia puts gas export controls in place

Australia PM Malcolm Turnbull

Australia PM Malcolm Turnbull

Photo by Bloomberg

27th April 2017

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – The Australian Petroleum Production and Exploration Association (Appea) has warned that the gas export controls announced by the federal government were short-term, and posed the risk of exacerbating tight market conditions unless accompanied by genuine reforms.

The federal government on Thursday said that it would impose export restrictions on gas to ensure sufficient domestic supply.

Prime Minister Malcolm Turnbull noted that the Australian Domestic Gas Security Mechanism would ensure gas supply in Australia always met 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, meaning, 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,” Turnbull said.

He noted that liquefied natural gas (LNG) exporters who are drawing from the domestic market will be ordered to limit exports to ensure local supply, while those exporters which do not draw more from the domestic market overall, will be licensed to export according to their forecasts.

“Securing supply in the domestic gas market will put downward pressure on retail prices in Australia,” Turnbull said.

The gas reservation policy is expected to apply only to east coast exporters and will comply with international obligations, the Prime Minister added.

“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.”

However, Appea CEO Malcolm Roberts has said that restricting exports is almost unprecedented for Australia.

“At a time when we need billions in new investment to create more gas supply, any intervention that creates sovereign risk is alarming.

“There is no doubt the east coast gas market today is tight. For years, Appea has been warning governments that the political and regulatory barriers to developing new gas supplies must be addressed urgently.

“Over the last five years, the industry has tripled east coast gas production, creating an entirely new supply from coal seam gas. The main obstacle to developing more supply has been the opposition of some state governments,” Roberts said.

He added that 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. The industry has raised with governments practical reforms that would lower regulatory costs and attract more investment. These reforms are even now more urgent,” Roberts said.

Australian oil and gas major Santos has meanwhile said that as an Australian company, Santos has been a long term supplier of natural gas at affordable rates in support of the domestic market. 

“Moving forward Santos will supply more gas into the Australian domestic market than it purchases for its share of LNG exports,” the company said, adding that it will seek clarification of how the new policy will work in practice in order to understand from government the terms on which it is proposing to introduce this mechanism and how proposals that have been put to government to address the domestic market situation are being considered. 

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

Full consultation with industry will now take place with regulations to be in place by July 1.

Edited by Creamer Media Reporter

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