Gas giants would be forced to supply more energy to the domestic energy market under gas reservation plans that could be adopted by both sides of politics in an election shootout over how best to secure more energy and drive down prices.
In moves that would unsettle some of Australia’s biggest export partners led by Japan, the Coalition is close to announcing details of its “prospective” gas reservation plan in exchange for easing environmental and carbon emissions regulations on developers.
Sources told the ABC that Peter Dutton was originally expected to announce the policy during the election campaign. But there is now speculation the opposition leader could make it a key element of his budget reply speech on Thursday.
“It’s becoming imminent,” one source said.
The Coalition has been developing a policy to secure more gas for Australia. (ABC News: Matt Roberts)
There is widespread industry expectation that Labor is poised and ready to immediately counter Mr Dutton with its own version of a reservation aimed at boosting the supply of gas to the east-coast energy market.
A domestic reservation has long been regarded as a bridge too far for the major parties, which are fearful of being accused of generating “sovereign risk” for global investors and energy giants that have sunk hundreds of billions of dollars into gas export infrastructure.
However, with a hung parliament seen as increasingly possible, the idea has been given fresh weight because many teals and independents are in favour of garnishing a greater portion of gas production for domestic users.
The Coalition will announce its reservation policy alongside a wide suite of promises that it says will “flood” the market with gas by 2028, which is when the Australian Competition and Consumer Commission says the market will suffer a supply shortfall.
Energy experts warn that the devil is in the detail of any reservation policy, which economists regard as an effective subsidy because it effectively shifts supply destined for export markets, where prices are higher, to domestic buyers who are being guaranteed a lower price.
Grattan Institute energy expert Tony Wood said the problem with a gas reservation policy was that it effectively forced producers to put supply into the market at a loss.
“The difficulty for the reservation policy is working out what the number should be so the market is oversupplied and prices come down,” he said.
“In some way, you end up subsidising domestic use of gas. If that’s what you want to do, that’s fine. Could it be made to work? Maybe.”
While both major parties would insist their reservation policies apply only to future gas projects, the industry is bracing for a potential fight over the fine print.
Devil in the detail
Among the gas giants’ concerns is any policy that muddies the definition of an existing gas project.
For example, would new wells that are drilled in existing gas fields be regarded as additional and therefore required to supply the domestic reservations? Or would the policy only apply to future supply contracts?
The constitution limits the application of any federal gas reservation policy to offshore gas, which means it will cover future gas projects off the Northern Territory and Western Australia, as well as Bass Strait, Gippsland and Otway zones.
In addition to reservations on new gas in those areas, the opposition believes it can quickly unlock about 143 petajoules of gas each year by fast-tracking about a dozen projects awaiting approvals. Current domestic demand is about 400 PJs a year.
The Coalition’s list of likely projects that could be up and running by 2028 include Narrabri, which is onshore, Gippsland’s Lake Blue Energy Wombat project, and GB Energy’s Golden Beach Gas Field.
Many of those face stiff resistance from environmental groups.
Gas plan fills gap in nuclear policy
The Coalition’s gas plan, which has been brewing for several months, forms the core of Mr Dutton’s $331 billion nuclear energy plan.
Given the Coalition plan’s likely decades-long lead-in time for nuclear energy, gas will be needed as an interim energy source as coal power generation exits the market.
Labor’s energy plans have their own need for more gas, which the government says will be needed to “firm” or back up intermittent wind and solar power.
Gas reservation policies already exist at the state level, including WA and Queensland, where acreage released for development includes a domestic supply requirement.
Nationals leader David Littleproud said on Monday that the Coalition would “flood” the market with gas, which he said was the “only input that you can ramp up supply [for] quickly”.
“The others, in building a coal-fired power station, a nuclear power plant, or even a wind or solar farm of industrial scale, take too long,” he said.
“Whereas gas, you can get into the grid in 12 to 18 months and put that downward pressure on energy prices, and that’ll put downward pressure on your grocery bill and the entire economy.”
Prime Minister Anthony Albanese on Monday scoffed at the former Coalition government’s “gas-led recovery”, saying it led nowhere, and that providing the industry with policy certainty was the key.
Tasmanian senator Jacqui Lambie blasted the government’s planned household energy relief, saying it was money that would flow to multinational energy companies.
Instead, Labor should consider a gas reserve policy, she said.
ACT senator David Pocock said uncontracted gas should be diverted into the domestic market.
“We don’t have a gas supply shortage, we have a gas export problem,” he said.
“We prioritise exporting gas ahead of actually looking after Australian households and businesses.”
Opposition resources spokeswoman Susan McDonald told The Australian last month that the Coalition would demand producers “prioritise” the domestic market as part of faster environmental approvals.
“There will be a certain proportion that they will have to commit to the domestic market,” she said.
