Gas bills 'no longer hostage' to international market under new laws to drop price

From July next year, Queensland's three LNG ventures will be required, by law, to set aside 20 per cent of their export volumes for Australian users, creating a "modest oversupply" in the domestic market. "There'll be a requirement on gas producers to sell that 20 per cent to Australian users," Energy Minister Chris Bowen said, unveiling the biggest intervention in the market in over a decade. "It will ensure a modest oversupply of Australian gas use, which will put downward pressure on prices." With gas prices currently sitting at about $12 a gigajoule, Mr Bowen would not say how much prices would fall under the new scheme. But he did reject suggestions it would "flood" the market with gas and render smaller developments uneconomic. "This is not going to be uncontroversial, but people said similar things when Western Australia introduced their reservation policy 15 years ago," Mr Bowen said. The announcement comes just weeks after the government killed off a campaign to increase taxes on gas giants in this year's budget amid fears it could anger the trading partners Australia relies on for fuel. Relevant embassies were briefed ahead of today's announcement, with the government assuring customers that foundational contracts and those entered into before December last year would be preserved. Resources Minister Madeleine King, who has previously likened a gas reservation scheme to a tax, said the "historic" change would ensure the prices Australians pay for Australian gas were no longer "hostage to international markets". Under the scheme, producers will need to prove to Ms King that they have supplied, not just offered, gas to the domestic market, before they are given permits to export. "They have to go further than simply offering gas, which is the current requirement. They have to actually supply," she said. "It's a structural shift which creates a buyers' market ... where producers have to compete among themselves for contracts to supply the domestic market. "We expect that to put quite strong downward pressure on prices." Australia is one of the world's biggest LNG exporters, but according to the Australian Competition and Consumer Commission (ACCC), east coast gas supplies could fall well short of demand from 2028, "despite there being sufficient reserves and resources for at least the next decade". At the same time, gas prices on the east coast have tripled, pushing up power prices and pushing energy-intensive industries, including aluminium smelters, to the brink of closure. Once fiercely opposed, the LNG industry is now broadly supportive of an east coast gas reserve, if only to end the years of ad hoc and heavy-handed interventions by successive governments, which according to the ACCC are "exacerbating the risk of domestic supply shortfalls". Between them, the Shell-backed Queensland Curtis LNG and Origin Energy's Australia Pacific LNG ventures already meet about 40 per cent of the east coast's gas needs through uncontracted gas. The Santos-led Gladstone LNG joint venture does not currently supply any gas to Australia and, in fact, buys gas from the domestic market to fulfil its export contracts with Malaysia and South Korea.