The Australian federal government is set to announce significant changes to the east coast gas market, aiming to improve supply and affordability. This forthcoming reform follows years of complicated policies that have left the market in disarray. Stakeholders, including gas producers and consumers, are expressing cautious optimism that the government’s approach may lead to a more stable energy landscape.
The government initiated its Gas Market Review earlier this year, intending to “improve and streamline” the complex regulatory framework governing the east coast gas market. The objective is to ensure a sufficient and affordable gas supply over the long term. However, gas producers have voiced concerns that reserving gas for domestic use from existing export supplies could undermine investment confidence.
A well-functioning gas market is crucial for Australia’s economic and energy security. Natural gas serves as a reliable energy source for over 5 million Australian homes and is vital for manufacturing. According to a report by the Australian Competition and Consumer Commission (ACCC), current regulations have not only failed to increase gas volumes or lower prices but have also heightened the risk of domestic supply shortfalls.
The anticipated introduction of a gas reservation policy is expected to provide clarity for both producers and consumers. The government has reassured key trade partners, including Japan and Korea, that existing long-term gas export contracts will not be negatively impacted. This assurance is essential as Australia’s gas exports play a crucial role in attracting investment for new supply, although interest has waned amid previous regulatory interventions.
Australian Energy Producers supports a reservation policy that is contingent upon new gas supplies. They believe that such a policy can help foster long-term confidence for producers and large manufacturers, enabling them to invest in major projects and infrastructure. Analysis indicates that up to 140 petajoules of additional gas supply could be available by 2030, which is more than three times the amount needed to prevent forecasted shortfalls in southern states.
One notable project is the Santos Narrabri project, which has the potential to supply half of New South Wales’ gas needs. Unfortunately, this project has faced regulatory hurdles and legal challenges for over a decade. While a reservation policy could provide some relief, experts caution that it will not resolve the underlying issues facing the gas market.
Immediate action is necessary to eliminate regulatory barriers that delay new supply, including bureaucratic obstacles and legal disputes. Critics have pointed out that the recent agreement with the Greens to exclude gas projects from expedited environmental assessments represents a missed opportunity to reduce costs and expedite the delivery of gas to consumers.
Australia possesses abundant energy resources, particularly at a time of heightened global demand and geopolitical uncertainty. The country is well-positioned to meet its long-term domestic energy needs while remaining a reliable energy partner in the region.
Gas producers are eager to collaborate with the government and energy users to capitalize on this moment and break the cycle of ineffective reforms. The stakes are high, as the economic implications of failing to implement effective reforms could be significant. The government’s response to the challenges of the east coast gas market will be closely scrutinized, both domestically and abroad.
