Australia’s three biggest gas producers have promised Prime Minister Malcolm Turnbull that they will meet in full the gas shortfall threatening the east coast next year.
The PM said the promise, made by Origin, Santos and Shell in a meeting this morning, would mean the government would not have to impose export restrictions on liquified natural gas (LNG).
This is something the LNG industry is desperate to avoid.
“[The companies] have given us a guarantee that they will offer to the domestic market the gas that was identified as the expected demand shortfall by AEMO [Australian Energy Market Operator] in 2018,” Mr Turnbull said following the meeting.
“They’ve stated that will provide a similar guarantee over two years.”
Mr Turnbull said the details of any deals between gas producers and domestic buyers would be transparent, adding that until now the market had been “opaque”.
Nothing was said on how the deal would affect gas prices.
The PM gave no further details of the deal, saying more discussions would take place next week.
If the gas giants come good on their promise, it could save jobs and prevent blackouts. However, the lack of detail will raise questions over exactly how the promise will be delivered.
Unlike coal, gas cannot be stockpiled, nor can it be easily stored. That means producers need to be sure they will find buyers when they go to market.
While Mr Turnbull can force producers to make gas available to the domestic market, he cannot force customers to buy it – something gas producers are very aware of.
The deal announced today did not answer this question, but it is a question that gas producers will be asking the government behind closed doors.
As for the gas security mechanism that would restrict exports – the oft-mooted “trigger” – Mr Turnbull said: “If we are satisfied that a shortfall will not occur, then we don’t need to use the mechanism. But it is a very important part of the tool kit.”
The major part of Mr Turnbull’s press conference was spent scolding the New South Wales and Victorian government for placing moratoria on LNG exploration and extraction.
“Longer term, we need to produce more gas,” he said. “The failure to develop the onshore gas is costing households dearly.”