Australia's ACCC head urges Gladstone LNG operators to supply domestic market

Sydney (Platts)--14 Mar 2017 426 am EDT/826 GMT

The chairman of Australia's competition watchdog has urged east coast LNG operators to provide as much supply as possible to the struggling domestic market and raised concerns over their moves to sell additional volumes in the international spot market.

"They would be well advised to support the domestic market as much as they can at this critical time," Australian Competition and Consumer Commission Chairman Rod Sims said, according to an early copy of his speech to the 5th Annual Australian Domestic Gas Outlook conference in Sydney obtained by S&P Global Platts.

LNG exports over the past couple of years via the three terminals -- Australia Pacific, Gladstone and Queensland Curtis -- almost tripled demand in the eastern and southeastern states, Sims said.

This stretched Australia's eastern seaboard's gas supply, pushing up prices, and resulting in warnings of a likely shortage.

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The ACCC conducted an inquiry in April last year and found that the east coast was expected to produce sufficient gas to meet both domestic demand and existing LNG export commitments until at least 2025.

But, if LNG operators sell in the international LNG spot market, it could change the situation.

"Most LNG producers are selling gas on the LNG spot market in addition to meeting their contractual commitments and these volumes are expected to increase going forward," he said.

"The comment that I made [advising the LNG producers to support the domestic market] seems relevant here," he added.


Sims called the discussion on the looming gas shortage in Australia and criticism of LNG producers as a strange debate.

"As our inquiry pointed out, Australia has enormous gas reserves; gas availability is clearly not the issue," he said. "The Inquiry also pointed out that Australia has and will benefit enormously from the three large LNG projects in Queensland. These three projects also saw significant gas resources developed that otherwise would not have been."

The only criticism of the three LNG gas developers to be made it is that they fell into the "usual commodity project trap of assuming then high $100 plus oil prices would continue," he added.

Sims said that environmental restrictions, moratoria and bans on onshore gas production caught the market off guard and played a leading role in the creating supply concerns.

"I doubt anyone in the industry expected Victoria to ban all onshore gas exploration and production, which has stopped even conventional gas projects; nor could they have foreseen the delays and uncertainty over projects in New South Wales and the Northern Territory," Sims said.


While other states connected to the east coast's gas pipeline network are crimping access to their gas resources, South Australia -- which has suffered from widespread blackouts in recent months -- announced on Tuesday that it will provide incentives for gas exploration.

"The state government will immediately provide an extra [A]$24 million for a second round of funding to incentivize companies to extract even more gas and create more jobs. This new round will open immediately," the South Australian government said Tuesday in its new energy plan.

It will also provide 10% royalty to landowners whose property overlies a petroleum field that is brought into production, it said.

"South Australia has vast untapped gas resources. It is estimated the Cooper Basin alone could potentially supply Australia's energy needs for more than 200 years," it said. The Cooper Basin straddles South Australia and Queensland.

The South Australian government also said that it would build its own state-owned gas-fired electricity generator.

"Due to the lack of clear national policy settings, investment in new thermal generation has stalled," it said. "The generator will provide up to 250 megawatts of generation, which can be switched on in times of emergency."

--Nathan Richardson,
--Edited by E Shailaja Nair,

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