July 20, 2015
Australia’s liquefied natural gas (LNG) industry brings demonstrated benefits to all Australians in terms of jobs, regional development and export earnings. The Minister for Industry, Ian Macfarlane, believes that calls for the adoption of a national domestic gas reservation policy are misplaced.
According to the Minister, analysis shows that such polices are ineffective. Countries
now struggling to meet domestic demand and have to import high-priced gas despite having large domestic gas resources that are still undeveloped. The United States, which is often cited as comparable to Australia, only has the potential to restrict exports by LNG to some destinations. It has never used this restriction and it has no such constraints on the majority of its exports which are by pipeline.
Many recent studies have shown that the key issue for Australia is to develop our ample gas resources. State and territory governments have primary responsibility for onshore gas development and are focusing on removing unnecessary impediments so that investment in gas projects can respond to tightening supply and changing price.
According to the Minister, reservation policies deter investment and do not sustainably increase the supply of gas or decrease the price. This is not the unique conclusion of the Australian Government. Indeed, the Minister notes the Council of Australian Governments (COAG) Energy Council which is made up of all state and territory energy Ministers, explicitly rejected national gas market interventions at its last meeting in December 2014 in favour of options to improve market function and remove supply impediments (www.scer.gov.au).
The work to improve gas market function is well underway and is informed by a number of key pieces of analysis. This includes the Eastern Australian Domestic Gas Market Study and the recently released Energy White Paper, which articulates the governments’ gas market development strategy (www.ewp.industry.gov.au). The government has also commenced an Australian Competition and Consumer Commission public inquiry into the competitiveness of wholesale gas prices (www.accc.gov.au); outlined a range of actions in the COAG Energy Council’s gas market reform plan; and is implementing its Domestic Gas Strategy which supports the responsible development of Australia’s unconventional gas supply based on scientific data and expertise (www.industry.gov.au/DomesticGasStrategy).