Within weeks, Parliament will likely decide on the largest ever intervention in Australia’s gas market.
As the Senate Inquiry into the Federal Government's Domestic Gas Reservation legislation recently heard, the scheme as designed is deeply flawed and could damage investment, competition and future supply.
The legislation passed the House of Representatives last week unamended, but changes can still be made in the Senate, where the Government needs the support of either the Coalition or the Greens.
The proposed 'must sell' obligation, coupled with a requirement to oversupply the domestic market by 10 per cent, remains our biggest concern and advocacy focus. It risks flooding an already well-supplied east coast market, potentially forcing exporters to sell significant volumes to domestic buyers at artificially low prices. This would crowd out domestic-focused producers, reduce competition and discourage investment, ultimately making reliable, affordable gas harder to deliver.
This was our key message to the Senate Inquiry, reinforced by several members in their evidence. As our submission highlighted, the scheme should more closely reflect Western Australia's reservation scheme, which allows gas genuinely and competitively offered to domestic users – but not required – to be exported.
The legislation has also cast unnecessary doubt on WA's gas industry, which could be captured by national laws even though WA already has an effective state reservation scheme. The scheme will also apply to Northern Territory LNG exporters, despite also being effectively disconnected from the east coast gas market.
There is broad support for a well-designed reservation scheme: producers, users, the Coalition and unions agree the current framework isn't working.
As the Senate prepares to consider the legislation, we are focused on securing bipartisan support for the changes needed to deliver a workable scheme with long-term certainty for all east coast participants.
It should not be forgotten that the main objective of the Federal Government’s reservation scheme is to address forecast gas shortfalls in southern states, particularly in Victoria – Australia's most gas-dependent state. Without immediate steps to increase gas production in Victoria, a reservation scheme alone will not work.
That is why the Victorian election on 28 November is so important for our industry, and why we've run a prominent campaign, backed by the Australia Runs on Natural Gas advertising campaign and polling, highlighting strong community support for more local gas production and household energy choice.
Increasing gas production has become a key election issue, with the Coalition pledging to support more exploration and overturn the Government's ban on new household gas connections from next year. One Nation’s policy mirrors that of the Coalition, and even the Labor Government has announced approvals for new gas supply and storage projects in recent weeks.
With big decisions due in both Canberra and Victoria in the next few weeks, our message is clear: a workable reservation scheme and continued investment in new gas supply are essential for Australia’s long-term energy security.
Samantha McCulloch, Chief Executive of Australian Energy Producers