Australia’s natural gas industry is pushing back against proposed rules that would give the government more power to curb exports of the fuel in the case of a domestic shortage.
The effort comes after the government suggested revisions to strengthen the Australian Domestic Gas Security Mechanism, a last-resort measure that restricts some liquefied natural gas exports to ensure enough fuel is available for domestic use. The government asked for feedback to the changes last month, with the goal of implementing the new system by April 1.
“The government should prioritize increasing domestic gas supply, rather than compromising international contracts, investments and partnerships,” the Australian Petroleum Production & Exploration Association said in comments submitted to the government last month. “Intervention in the gas market puts Australia’s reputation as a stable and reliable energy and trading partner at risk.”
The proposal by Australia — one of the world’s top LNG exporters — is designed to protect consumers from shortfalls at home as Russia’s war in Ukraine threatens to keep global markets tight. Companies, including energy giant Shell Plc, fear that any intervention will result in canceled deliveries to Asian customers, which have invested billions of dollars in export infrastructure and signed binding contracts to purchase the fuel.
Still, the government has stressed that long-term contracts — under which most gas is sold — will be unaffected. The draft mechanism also includes rules to protect that supply.
One of the most contentious pieces of the draft guideline is a proposal to allow the Minister of Resources to decide every quarter whether LNG exports should be curbed. The current rule calls for an annual decision. Companies would also be given as little as 30-days notice.
The Australian Competition & Consumer Commission said in January that it expects a shortfall in the country’s east coast this year if LNG producers export all of their uncontracted gas. There are three LNG export plants in the eastern state of Queensland, operated by Shell, Origin Energy Ltd. and Santos Ltd.
“Shell urges the government to reconsider the architecture of the mechanism in order to provide security for all long-term export contracts,” the company said in response to the proposed measure. “Preserving our position as an energy supplier of choice to Asian markets remains essential to Australia’s future prosperity.”
The Department of Industry, Science and Resources is currently reviewing the content of the submissions, including requests for privacy and issues around confidentiality, according to an emailed statement.
