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Australia to consider reserving some gas for home market

[MELBOURNE] Australia, the world's largest liquefied natural gas exporter, will consider forcing gas producers to reserve some supply for the domestic market, the government said on Tuesday as it looks for ways to cut energy bills for households and manufacturers.

Resources Minister Matthew Canavan and Energy Minister Angus Taylor said they would review a range of policies, including gas reservation, pipeline access and price transparency to come up with options by Feb 2021.

Australian conservative and Labor governments have long resisted calls for domestic gas reservation on the view that interfering in the market could distort prices and deter new production in the long run.

However, following a tripling in wholesale gas prices over the past five years after the start-up of liquefied natural gas (LNG) exports from eastern Australia, the government has come under pressure to boost supply and cut prices.

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"Past approvals of large gas export projects have not adequately considered the impact on the domestic gas market and that has contributed to some of the pressures we have seen in recent years. We cannot afford to repeat these past mistakes," Mr Taylor and Mr Canavan said in a joint statement.

Two years ago the government introduced a controversial Australian Domestic Gas Security Mechanism, which requires the resources minister to decide each year whether to limit LNG exports from Queensland state to avert any forecast local shortage.

So far it has not used that trigger, and now plans to review that mechanism. Taylor and Canavan also said they would pressure states to lift their restrictions on onshore gas drilling.

Gas-reliant manufacturers, such as chemicals makers, steel makers and food processors, have long called for gas reservation to boost supply as soaring energy prices have hurt profits and led to plant closures.

They point to cheap prices in the state of Western Australia, the country's biggest exporter of LNG, which has long required producers to sell 15 per cent of their output to the domestic market.

"If we want to power a resurgence in Australian manufacturing ... then there is no more important task than reforming the domestic gas market," industry group Manufacturing Australia said in a statement.

Australia's petroleum industry said it would work closely with the government on its gas policy review but warned that market intervention could come at a cost, including increasing sovereign risk.

REUTERS