Federal Minister for Energy and Emissions Reductions Angus Taylor has announced a raft of new policy measures designed to protect Australia’s domestic gas supplies, make it easier and cheaper to transport gas around the gas market, and ultimately reduce electricity prices.
Firstly, the Government will bring forward the scheduled review of the Australian Domestic Gas Security Mechanism (ADGSM) to this year. A review was scheduled for next year, but given major changes in global gas markets over the past six months, the government has decided to bring this review forward.
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 will specifically investigate the ongoing appropriateness of the ADGSM’s Total Market Security Obligation arrangements. Since the ADGSM was established, the ACCC 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. The review will be carried out by the Department of Industry, Innovation and Science and be completed by the end of September.
Secondly, the Government will consider options to establish a prospective national gas reservation scheme.
According to Mr Taylor, past approvals of large gas export projects have not adequately considered the impact on the domestic gas market, and that has contributed to some of the pressures we have seen in recent years.
“We cannot afford to repeat these past mistakes,” said Mr Taylor.
“This is an opportunity to examine whether a reservation scheme could succeed and be applied at the national level. In considering the establishment of a gas reservation scheme, the Government will work cooperatively with the States and Territories.
“The establishment of any such a scheme should coincide with State and Territory governments removing unwarranted restrictions on gas developments. The Government will seek to conclude its consideration of options by February 2021. Should agreement not be reached with the states, the Government will look to develop its own policies to ensure future gas export proposals provide sufficient gas into the domestic market.”
Thirdly, the Government we will increase transparency and supply in the gas market. This includes continuing reforms through the COAG Energy Council requiring improved transparency from gas producers and LNG exporters on prices, reserves and resources, and a comprehensive review of pipeline regulation.
Consultation on these reforms will occur over August and September.
The Government has also stated it will improve supply through further action by:
- Extending the ACCC’s role in monitoring and publishing data on the gas market in Australia until December 2025
- Engaging with LNG plants to explore whether some of their processes could be electrified, to free up more gas for domestic use
- Engaging with the manufacturing sector to explore opportunities to lower gas costs and reduce demand through increased energy efficiency and electrification measures
- Considering the feasibility of establishing mechanisms to facilitate collective bargaining and improve the negotiating position of large industrial users for gas supply
- Seeking COAG Energy Council agreement to task the Australian Energy Market Commission with advising on further steps that could be taken to accelerate the establishment of a more liquid wholesale gas market.
These new measures will reinforce existing Government action including:
- The Prime Minister’s renewal of an agreement with east-coast LNG exporters to ensure domestic gas supplies in September 2018
- An $8.4 million commitment to accelerate the development of the Beetaloo Basin, announced in the April 2019 Budget, including a feasibility study to fast-track production for domestic use
- Reform of gas pipeline regulation led through the COAG Energy Council
- Introduction of the Australian Domestic Gas Security Mechanism in July 2017
Minister for Resources and Northern Australia, Matt Canavan, said the measures would help create a stable domestic environment for the gas sector to grow, creating more jobs and wealth for Australians.
“Gas extraction has been one of the largest contributors to value-added growth in the mining industry in recent years because of growing export volumes. We want to see that success continue but it must return greater dividends to Australians.
“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.
“Price and supply are inextricably linked. To put downward pressure on prices and shore up supply, we need more exploration and production. For too long we’ve seen some State and Territory governments shelve onshore gas exploration for political purposes and the price we’ve paid is restricted supply and price creep.
“The plan outlined tackles that and a host of other issues from all directions.”
Mr Taylor said gas powered generation would be increasingly important in balancing the National Electricity Market as more intermittent renewable energy sources enter the market.
“The reliable, secure and efficient supply of both gas and electricity requires the delivery of enough gas, at an affordable price.
“The measures announced today recognise we need a comprehensive plan across the gas supply chain which deals with production, prices and market transparency.
“But State and Territory governments must do their part by freeing up supply and supporting investment through the removal of bans on gas exploration.
“I encourage all State and Territory governments to take this action, and to work with the Australian Government to consider a national gas reservation scheme and further COAG Energy Council action on gas market reform.”
APPEA Chief Executive, Andrew McConville, said that the industry was committed to ensuring Australia continues to have a secure, sustainable and competitive natural gas supply for households and businesses.
“Sensible reforms can improve the efficiency of the gas market and its operation. But market interventions can adversely affect confidence in the oil and gas sector and discourage new market entrants and supply diversity.
“Both the ACCC and the Australian Energy Market Operator have confirmed there is enough gas supply to meet existing demand.
“But new resource development is needed to ensure continued supply and that gas can play its role in balancing the National Electricity Market as more intermittent renewable energy sources enter the market.
“We will work closely with the government to ensure confidence is restored, not undermined.”
APGA Chief Executive Officer, Steve Davie, said that gas is a crucial energy source for Australia.
“Issues affecting gas supply in Australia cannot be addressed with a single policy response and the announcement recognises that.
“We now have the opportunity to take a thorough look at the entire gas supply chain and to consider all options available to achieve affordable and reliable gas supplies domestically.
“It is vital we take a broad view, beyond market intervention alone, and consider what policies can provide a framework that encourages the investment required to underpin gas supply into the future.”
Energy Users’ Association of Australia (EUAA) Chief Executive Officer, Andrew Richards, said, “Addressing the supply and price of gas along the east coast cannot come soon enough.”