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Tensions are flaring ahead of the launch of Labor’s national gas reservation scheme, as eastern Australia’s largest gas producer calls on the government to reject rivals’ requests for “leave passes” from the policy.
In a yet-to-be-released submission to federal reservation rules obtained by this masthead, Australia Pacific LNG (APLNG) broke ranks with the Queensland government as well as industry voices, including the fossil fuel lobby, to double down on the need to establish an east coast reserve.
APLNG – a joint venture between Australia’s Origin Energy, US giant ConocoPhillips and China’s Sinopec – was joined by global energy company Shell in supporting new domestic supply commitments, including rules compelling it to set aside a specified amount of gas that cannot be sold overseas and must be delivered locally.
But the reservation scheme, proposed to set aside 20 per cent of exports from 2027 for domestic use, has been staunchly opposed by other east coast gas producers, which warn it threatens to kill investment in future sources of gas supply and could imperil trade ties with Australia’s major Asian partners.
The federal government’s proposed scheme does not include a formal carve-out for Santos’ GLNG, but it is believed the policy’s ministerial powers to approve alternative supply arrangements could benefit the company’s Gladstone operations by either temporarily exempting it from the scheme or deferring its contributions into the 2030s when its existing LNG export contracts begin rolling off.
APLNG strongly contests this, however, arguing it is crucial the rules are applied equally.
“For a domestic gas reservation framework to work it must apply equitably to each of the three east coast exporters and treat investors and Australia’s trade partners equally,” it wrote in its submission.
“Any framework that departs from the national interest and provides favourable treatment, a carve-out, or an effective leave pass to one set of trading partners or an individual company will fail to deliver.
“While APLNG remains committed to do our part to reserve gas for Australia, we will not support further, ongoing interventions that make our investors and trade partners effectively pay for the costs of meeting reservation obligations for another business that is both not contributing and taking gas back out of the Australian market.”
The majority of Queensland’s gas is locked into long-term export deals and sold as LNG to buyers in Asia while APLNG and the Shell-backed QCLNG joint venture near Gladstone together provide about 40 per cent of the east coast domestic market. However, the Santos-backed GLNG business, the state’s third gas exporter, is a net withdrawer of domestic gas to meet its export commitments.
Grattan Institute energy policy expert Tony Wood echoed the need for consistency in supply contributions if the proposed reservation scheme was to work.
He said while it was true Santos GLNG may not have surplus gas at its ventures in Queensland, the energy giant could source sufficient supply to meet its contributions to the domestic market.
“You don’t give them a variation, you insist they have a firm obligation to supply and they can get gas wherever they like,” Wood told this masthead.
“That includes both getting gas from the other two or doing a deal with, say Beach [Energy] or someone like that, to develop some more gas.”
Australian Workers’ Union national boss Paul Farrow agreed, saying any carve-outs for exporters will fail.
“One set of rules needs to apply firmly and needs to apply to all. The guiding principle of gas reservation is very simple and should not be corrupted: if you want to extract Australia’s gas – our sovereign wealth – you have a responsibility to offer a defined portion of that gas to Australians,” he said.
“No dodgy leave passes, no exceptions.”
The Queensland government’s submission, also seen by this masthead, called on the federal government to defer the reservation scheme.
It described the proposed 20 per cent of all LNG exports to be supplied to the domestic market as a “significant intervention”.
“The objective of deliberately oversupplying the domestic market with otherwise exportable gas will negatively impact investment signals and undermine the long-term supply response needed to sustain gas production,” according to the state’s submission.
“These risks are material and fall disproportionately on Queensland and Queensland producers.”
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