Gas Export Controls
The Prime Minister has this week announced he will take immediate action as part of his commitment to ensure a reliable and affordable energy supply for consumers.
Prime Minister Malcolm Turnbull, unveiled the Australian Domestic Gas Security Mechanism in April which allows the government to implement export controls and pass legislation as required to secure supply and put downward pressure on prices.
Mr Turnbull this week confirmed that gas export restrictions would be put in place from 1 January 2018.
The introduction of the LNG export market to Australia has created a complex situation where domestic gas consumers are paying more for gas than international buyers of the same product. The main driver behind this is the structure of the gas export contracts which are linked to the price of oil.
The specific mechanism that will be put in place by the government is yet to be determined and will need to be done carefully to ensure security of supply and fair treatment to consumers. Implications of intervention include; but won’t be limited to:
- Reduced investment in upstream gas which will bring higher prices long term;
- Uncertainty for domestic and international consumers;
- Reduced gas prices not flowing through to the electricity prices.
The Federal government is currently in consultation with industry to understand how best to implement an export restriction.