This year, the government has begun a sweeping review to ensure the rules requiring gas exporters to keep the local market well supplied are delivering “as intended”. Manufacturers and the Victorian government have revived calls for the government to set up an east coast reservation scheme for Queensland’s LNG sector, similar to what is in place in Western Australia, where gas exporters are required to hold back a prescribed volume for the local market only.
BlueScope’s Vassella on Wednesday will urge the government to go further still, and force a reduction in gas prices to prevent factories closing down.
He says the Albanese government should either become a bulk buyer of gas on behalf of local companies, or impose a levy on LNG producers’ exports of uncontracted gas that they choose to sell on the international spot market instead of locally, and use that revenue to reduce costs for domestic buyers.
“These are, without question, major changes to current east coast gas policy settings,” he says. “But they are not revolutionary.”
Gas producers remain staunchly opposed to the prospect of price controls, telling the government that seeking to artificially lower gas prices to below market value will undermine the economics of investing in new sources of supply and tighten supplies even further.
Two of Queensland’s LNG ventures – backed by Origin Energy and Shell – have signalled they are open to working with the government on the development of a reservation scheme, as long as all the state’s exporters are made to contribute to it equitably.
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But Santos-backed Gladstone LNG venture, which relies heavily on buying gas from the domestic market to meet its export commitments, along with key Asian LNG customers in Korea and Japan, have raised serious concerns that some proposals for the scheme’s design would risk driving out investment and jeopardising trading relationships.
Vassella insists that “no one is calling for contracts to be torn up”.
“We should ignore the self-serving objections of overseas energy companies,” he says.
