Australian LNG curbs imperil energy security in Asia,Santos’s partners warn

Energy giant Santos’s international partners in a Queensland gas project fear their countries’ energy security will be put at risk if the federal government restricts exports to boost domestic supplies,and warn the move could harm Australia’s future investment appeal.

The national consumer watchdog this week warned households and business across the eastern seaboard were facing a 10 per cent gas shortfall next year,leading Resources Minister Madeleine King to threaten to cap exports of liquefied natural gas (LNG) unless gas companies demonstrate they will plug the gap.

Australia’s east-coast LNG joint ventures are seeking to assure the market that they will supply enough gas to avert the threat of any shortfall next year.

Australia’s east-coast LNG joint ventures are seeking to assure the market that they will supply enough gas to avert the threat of any shortfall next year.AP

The Santos-controlled GLNG project in Gladstone,one of the three Queensland LNG joint ventures,has written to the Albanese government arguing that imposing unprecedented export controls under the policy known as Australian Domestic Gas Security Mechanism (ADGSM) was not the best way to address the challenges facing the market and may have “unintended consequences”.

Two of GLNG’s venture partners,Malaysian national oil company Petronas and South Korea’s Kogas,had invested a combined $14 billion in developing the Gladstone project to ensure energy security for their countries,the submission said.

“If GLNG’s production is curtailed through ADGSM,the energy security of these two countries will be put directly at risk. This is why,since 2017,these entities and countries have been watching the government’s position on this issue very closely.”

The Australian Competition and Consumer Commission on Monday said the shortage of 56 petajoules expected in 2023 was the largest since it began its inquiry into the gas market in 2017,and raised fears of rising bills for homes with gas heaters and gas-reliant manufacturers already struggling to remain viable.

It said LNG exporters were contributing to the forecast 56-petajoule shortfall by planning to withdraw 58 petajoules more gas from the domestic market than they expected to supply.

“This could place further upward pressure on prices and result in some manufacturers closing their businesses,” ACCC chair Gina Cass-Gottlieb said.

If the ADGSM is ultimately enacted,analysts say GLNG is the project likely to face the biggest export curbs because it withdraws more gas from the domestic market than it contributes.

GLNG and representatives from the other Queensland LNG producers – Origin Energy-backed APLNG and Shell’s QCLNG – held urgent talks on Monday to discuss drafting a new voluntary agreement to take to the government in a bid to ease concerns about the shortfall emerging,senior industry sources said.

The gas industry has disputed suggestions a shortage is looming,noting that the ACCC found 167 petajoules of gas remained uncontracted that could still be offered to local buyers.

“This is more than enough gas to ensure that no shortfall occurs,” Australian Petroleum Production and Exploration Association acting chief executive Damian Dwyer said. “Gas customers can be assured supply will be adequate next year so households and businesses can continue uninterrupted.”

GLNG submitted that the ADGSM could damage Australia’s reputation as a low-risk destination for international investment. It also said it may allow state governments in Victoria and NSW to “move slowly” on efforts to develop their own new gas fields.

“In 2017,the government established the ADGSM as a transitory measure of last resort that would stay in place until 2023 ... to allow Victoria and NSW sufficient opportunity to develop local gas supplies,” it said.

“There has been sufficient time since the ADGSM and heads of agreement were introduced for new gas developments to move from investment decision to the production stage,but there has not been a single onshore development in either Victoria or NSW to reach production stage.”

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Nick Toscano is a business reporter for The Age and Sydney Morning Herald.

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