Former Western Australia Premier Alan Carpenter has echoed these concerns, warning of an impending gas crisis in Eastern Australia. He is pressing the government to act quickly while a federal gas reservation policy is being developed. This policy seeks to empower local markets and communities in the face of growing demand and rising prices.
In his former capacity as premier of Western Australia, Carpenter introduced a statewide gas reservation scheme. This requires gas exporters to leave 15% of their production for domestic consumption. As the eastern states grapple with rising gas prices and a diminishing supply, they may soon need to source gas from interstate or even import it internationally. The realities on the ground are grave. With the east coast set to adopt a similar reservation policy, the federal government is sprinting against a self-imposed Christmas deadline to have it finalized.
Carpenter has warned that Australia risks becoming “a laughing stock of the energy-producing world” if it fails to address these issues swiftly. The urgency is especially striking because it’s been years since we’ve opened any new gasfields. This is largely the result of a string of moratoriums and rising grassroots resistance to the gas industry in states such as Victoria and New South Wales.
The Need for Immediate Action
That crisis has deepened exponentially. Industrial consumers of gas in energy-intensive industries, such as aluminium smelters, are being driven to the brink of closure by East Coast gas prices tripling to levels that squeeze consumers. Carpenter mercilessly blasted the federal government’s historic decisions. He said, “We had a federal government three or four years ago that was stupid enough to allow these companies to export as much as they like while taking no care for the Australian people.”
He emphasized that “the whole east coast of Australia is facing gas shortages, consumers are suffering, and it should never ever have happened.” With the looming deadline for a new reservation policy, the federal government is considering various strategies to boost domestic supply. One suggested solution is for the government to act as a “middle man.” They would purchase gas from Queensland’s liquefied natural gas (LNG) projects and on-sell it at below market rates to shore up exposed manufacturers.
The Queensland government has done a good job of controlling its supply of gas. They did release some land tenements to gas companies on the condition that the extracted gas would be used for domestic purposes. Their proactive strategy has secured $1.7 billion in additional petroleum royalties for the relatively small state, guaranteeing a steady local supply come hell or high water.
Industry Perspectives
Santos, one of Australia’s major gas exporters, has expressed differing views on the timing and implementation of a gas reservation scheme. As you might expect, they pointed out their competitive advantages. They further promised they would deliver gas to the east coast by 2027. Many are worried that existing practices won’t be enough to fulfill this new responsibility coming down the pipeline.
Carpenter pointed out that “those days are over. The game has changed,” referring to the shifting dynamics of energy production and consumption in Australia. He remained optimistic about overcoming this challenge, urging stakeholders not to succumb to defeatism: “Don’t take this rubbish that it’s all too late.”
Critics worry that even Santos’ promised approach—pumping things up by accelerating already-planned domestic supplies—won’t cut it. New South Wales’ Narrabri Project offers a way forward, but developing it would be an enormous challenge.
“Instead of forcing GLNG to reduce its exports, the government may allow GLNG to pay the other two neighbouring projects — run by Shell and Origin — to put more gas into the domestic market on GLNG’s behalf.” – Mr. Kavonic
This call for equitable contribution from all major exporters is repeated, and for good reason, across industry lines. Companies like Origin and Shell are on-board with a full-blown reservation scheme. They would like to see all three exporters doing their part right out of the gate.
“All east coast LNG producers equitably contribute to the domestic market.” – Origin’s APLNG
“All three exporters should contribute equally to the reservation, right from the start.” – Shell’s QCLNG
The Path Ahead
Debates over the administration’s gas reservation policy are growing more contentious. The Australian government is being backed into a corner by leaders from their industry and consumers alike. The skyrocketing price of natural gas has people all over the country wondering if our domestic needs are being put first.
Energy economist Alan Carpenter warned that without bold action, Australia might soon be compelled to rely on more expensive gas imports. He continued to warn that if you can’t afford your own gas, then you’ll have to import gas from other cities. That would be an alarming alternative.
The deeply felt demand for a robust reservations system can’t be overlooked by a desire to strike balance. We need to promote our domestic goals, but not at the expense of our international trade obligations. Over the next few weeks, the challenge is for federal government to act with speed and resolution. It’s up to their actions to make sure Australia doesn’t become overly reliant on imported gas.
