Why gas prices could rise if government scheme fails because of loopholes | The Business | ABC NEWS

A cross-sector alliance is warning of weaknesses in the government’s domestic gas reservation scheme that could be exploited by producers to avoid supplying the local market. The group is seeking amendments to the draft legislation, which they say has been watered down and appears to allow one particular exporter off the hook.

Labor’s gas reservation policy aims to make LNG exporters set aside gas for local users on the east coast. But the government has since faced lobbying from Santos and is leaving flexibility for producers to supply up to 20 per cent to the domestic market, which experts worry won’t increase supply and could push prices higher. Senior fellow of the Energy Program at Grattan Institute, Tony Wood says the minister could allow them to have a lower level of obligation, effectively take advantage of their position. Grattan Institute analysis of ACCC data shows Santos’ GLNG is the only Queensland exporter to have consistently taken more gas from the domestic market than it provides. The lobby group representing businesses says Labor has just one chance to get its policy right and help bring gas prices down. Australian Industry Group chief executive Innes Willox says there shouldn’t be any carve-outs or games around gas contracts. “We want it very clear that there needs to be reservation of Australian gas for Australian businesses and Australian households”, he said.

The union representing workers in the gas industry is also calling on labor to ensure there are no loopholes. Paul Farrow, National Secretary, Australian Workers’ Union said “do not fold into the Santos GLNG. Make sure we close the loopholes that they cannot squeeze through and make sure they are contributing to an East Coast gas reservation from day one.”

Beijing has also sounded warnings. China is a major owner — and customer — of both Asia Pacific LNG and Shell’s Queensland Curtis LNG. In a submission, it said it hopes “the draft legislation will uphold the principle of fairness and apply the relevant requirements consistently to all LNG exporters, while ensuring equitable treatment of Australia’s trading partners and foreign investors.”

Santos CEO Kevin Gallagher last month told the National Press Club that the company will be able to meet the government’s proposed requirements for the east coast gas market.
A spokesman for Federal Resources Minister Madeleine King told the ABC while players with existing contracts would have protection in the interim, it was not a blanket exemption and all exporters will be expected to make contributions to the domestic market.
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