AUSTRALIA'S GAS FOR AUSTRALIA

PLATTS - Australia's federal government Tuesday flagged further intervention into the country's gas supply chain, announcing that potential measures could be introduced which include a national gas reserve as well as changes to LNG export controls.

"While we are proud that Australian gas powers industry around the world, we must also be able to reliably and affordably harness gas to grow our own industries and create more Australian jobs," Minister for Resources Matt Canavan said in a statement.

The government will examine whether a reservation scheme could succeed and be applied at the national level. Western Australia already has a policy in place that reserves the gas equivalent of 15% of LNG production from each of its export facilities.

The announcement came with federal pressure applied to the states, with it saying that any such scheme should coincide with state and territory governments removing "unwarranted" restrictions on upstream gas developments - of which there are various across Australia, concentrated on the east coast.

The Australian Petroleum Production and Exploration Association expressed concerns over the announcement.

"While governments may seek to intervene in markets for political purposes, there should be no illusion that intervention is without costs -- not least of which that sovereign risk can adversely affect confidence in the sector," said APPEA chief executive Andrew McConville in a media release.

"The best way to put downward pressure on gas prices remains more gas supply. Eastern Australian gas users have paid a high price for unnecessary, unscientific restrictions on gas development in Victoria, New South Wales and, until recently, the Northern Territory," McConville said.

The government aims to conclude the consideration of options by February 2021. If no agreement is reached with the states by then, it plans to develop its own policies targeting future gas export proposals.

PRICES A FACTOR IN EXPORT CONTROL DECISION

It also aims to bring forward a review of the Australian Domestic Gas Security Mechanism -- which is an LNG export control measure -- from next year to the end of September.

"The review will assess if the ADGSM is still fit for purpose to deliver a functional domestic gas market with the lowest possible prices for consumers while ensuring strong investment in new gas production," it said in a statement.

"It will specifically investigate the ongoing appropriateness of the ADGSM's Total Market Security Obligation arrangements," it said.

The TMSO involves export controls on LNG projects if it is determined that a gas supply shortfall in the coming year is likely, but these have not been imposed as LNG exporters have ramped up their domestic supplies.

While it applies to all of Australia, the concerns of domestic shortages have been concentrated to the east coast.

The government is currently looking to include prices in its decision-making process.

"Since the ADGSM was established, the [Australian Competition and Consumer Commission] has developed a 'netback' gas price series and it is timely to clarify how this and other gas price information contributes to the government's decisions on wider gas policy," it said.

The third part of the government's plan is to increase transparency, including price information from gas producers and LNG exporters, information on reserves and resources, and a review of pipeline regulation. Consultation on these reforms will take place over August and September.

Australia, with an estimated 75.1 million mt, was the second largest LNG exporter in the world in fiscal 2018-2019 (July-June), just behind Qatar which has a nameplate capacity of 77 million mt/year. It is expected to become the largest in the world in the current fiscal with a forecast of 80 million mt, EnergyQuest said in late July.

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