Volatile objectives

June 2017

More exploration, more research in the Bass Strait, and a renewed commitment to potential export controls: the Australian Government is stepping up its efforts to secure domestic gas supply.

Australia is on train to become the world's largest exporter of liquid natural gas (LNG), yet there are concerns that the eastern states could experience a shortage of gas.

The Australian Government has now confirmed it will implement new regulatory controls to give domestic customers priority access to gas supply before it is exported. The move is also understood as a push against anticipated price hikes for gas in Australia.

The proposed Australian Domestic Gas Security Mechanism (ADGSM) will give the Government the power to impose export controls on companies when there is a shortfall of gas supply in the domestic market (a detailed graphic outlining the mechanism can be accessed here).

First announced in April this year, industry groups such as the Australian Petroleum Production and Exploration Association have voiced concerns that the scheme could put "at risk Australia’s international reputation as a stable country with low sovereign risk".

And its now reiterated intention to go ahead with the proposal was met with similar comments, such as from former federal government minister and now chief executive of the Queensland Resources Council Ian Macfarlane:

"When the government interferes with the market it tends to frighten away investors."

Macfarlane says that the only way gas could become cheaper is by producing more, which is in line with latest government efforts to boost supply of gas

Production of gas in the Bass Strait off the Victorian coast - the main source of supply for Australia's eastern states - is indeed in steep decline. According to a recent McKinsey report, current levels of offshore gas production in the Bass, Gippsland and Otway basins could fall from around 405 petajoule (PJ) to 136 PJ by 2030. 

However, the report suggests that the rate of decline of around 8% per year could be halved if brownfield potential in Gippsland and Otway basins were developed.

The Australian Government aims to address this, including by offering new offshore petroleum exploration acreages to boost exploration in the region.

And in a collaboration with the Victorian and Tasmanian Governments, it is about to complete a study* into offshore gas basins in Southern Australia, as part of a $90 million investment in domestic gas security and supply.

*the Offshore South East Australia Future Gas Supply Study.

More information: http://minister.industry.gov.au