Australia’s government has relaxed gas supply rules for producers aimed at securing enough gas for the domestic market. Originally, the rules stipulated that producers should reserve 20% of output for the Australian market. Now, the proposal is for up to 20% of output to be reserved for the domestic market.
The proposal was first tabled in May this year, in response to worry about looming gas shortages in parts of the country, notably the east coast. The east coast of Australia is particularly vulnerable to supply shortages. Last year, the country’s competition regulator warned the market could swing into a deficit by December. That danger was temporarily averted thanks to the Australian Domestic Gas Security Mechanism, but the competition authority still warned last year that the risk of shortages remains.
Now, however, the government has established that if producers reserve some of their output for the domestic market, they could inject an additional 200 petajoules into domestic supply. This is more than enough to offset projected shortages of some 140 petajoules, Energy Minister Chris Bowen said, as quoted by Reuters.
“The scheme ensures domestic customers can buy from a larger pool of gas, reducing the risk of tight market conditions driving price spikes, promoting long-term contracting and shielding them from global volatility,” the official said in a statement today. The actual portion of output to be reserved by each LNG producer would be determined by the Australian Energy Regulator.
The energy industry is far from thrilled with this policy, however. The idea of gas reserve mandates first emerged in 2017, leading to the Australian Domestic Gas Security Mechanism aimed at making sure one of the top global exporters of liquefied natural gas did not suffer shortages at home due to excessive exports. The current rules build on that mechanism to further strengthen gas supply security.
By Irina Slav for Oilprice.com
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