The Australian Government has signed a new Heads of Agreement with East Coast LNG Exporters to prevent a gas supply shortfall and secure competitively priced gas for the domestic market.
The negotiations ensure additional gas supply, improving security and affordability of domestic gas supplies in future years, while also introducing transparency measures to improve the information available to customers.
In July, the Australian Competition and Consumer Commission forecast a gas shortfall of 56 petajoules (PJ) for the domestic market in 2023.
The new commitments from LNG exporters will lead to an extra 157 PJ for the domestic market in 2023, with the gas to be supplied in line with seasonal demand.
The new Heads of Agreement includes:
- LNG exporters to first offer uncontracted gas to the domestic market, on competitive terms, with reasonable notice, before exporting;
- in respect of uncontracted gas, the principle that domestic gas customers will not pay more for the LNG exporters’ gas than international customers;
- commits LNG exporters to offering gas on terms consistent with a code of conduct;
- enhanced transparency and accountability, with quarterly compliance reporting to the Minister for Resources, with oversight by the competition regulator the ACCC.
Minister for Resources and Northern Australia Madeleine King will meet every quarter with each east-coast LNG exporter to review whether they are meeting their individual commitments and ensure they are compliant with the Code.
Minister King said the new supply commitments, and Heads of Agreement, will deliver gas to the domestic market when needed, and ensures future uncontracted gas will be offered to the domestic market first, on competitive and reasonable terms, before it is offered for export.
“Given the agreement means the projected shortfall will be avoided, I am satisfied I do not need to take steps to activate the Australian Domestic Gas Security Mechanism at this time.
“This is a great outcome for Australia, will strengthen confidence in the domestic gas market and safeguard our global reputation as a stable and reliable energy exporter to our regional partners.”
The new Heads of Agreement was signed by Minister King and representatives from Australia Pacific LNG (APLNG), QGC Pty Ltd (operator of QCLNG), and Gladstone LNG (GLNG).
Shell said the revised Heads of Agreement attempts to strike the right balance by giving the market confidence that there will be gas available from Queensland at a competitive price in the near term.
“Shell’s QGC has already offered 130 petajoules of gas to the market for delivery in 2023, and we are pleased to provide Australian customers with additional reassurance through the revised Heads of Agreement.
“We are committed to working with the Government to help identify new domestic and international supply solutions that can be delivered at adequate scale into southern locations in the short to medium term.”
Santos Managing Director and CEO Kevin Gallagher said: “The HOA is a good outcome for Santos and very welcome to remove sovereign risk and ensure long-term LNG supply contracts are honoured. Australia is arguably the most important energy-producing nation in the Asia Pacific. While our own energy security must be assured, Australia’s role in regional energy security and in turn, the social, economic and geopolitical security of our region, is absolutely critical.”
The Heads of Agreement is available at https://www.industry.gov.au/domestic-gas-supply
