Australia’s main energy trade partners and allies are increasingly concerned about the latest proposals for energy market interventions in Australia, which could also undermine new investment plans in Australian natural gas and other energy resources.
Australia is seeking to limit gas supply for exports in order to ensure domestic energy security. The country is a large producer of natural gas and one of the world’s top three LNG exporters alongside the U.S. and Qatar. But Australia also faces a gas crisis on its east coast, and the Labor government of Prime Minister Anthony Albanese is looking at ways to protect domestic supply and avoid shortages and spiking energy bills.
Earlier this month, the Australian government proposed reforms to the Australian Domestic Gas Security Mechanism (ADGSM), seeking feedback by February 23. Under the reform, the mechanism will be used “to ensure that there is a sufficient supply of natural gas to meet the forecast needs of Australian gas consumers by controlling, if necessary, LNG exports,” the government says in the draft. Australia will protect long-term contracts, it notes.
Japan’s Mitsui warns that a government power to curb LNG exports could have “unintended consequences” on the industry, Mitsui Australia’s Masato Sugahara told Financial Review last week.
Energy companies operating in Australia are already rattled by last year’s cap on domestic gas prices, which has already led to at least one investment project being put on hold.
Commenting on Australia’s latest energy policy interventions, Credit Suisse energy analyst Saul Kavonic told the Financial Times, “There is growing concern that Labor is undermining commitments to trade partners about gas exports. That should be a red flag for the government.”
“This is the most anti-business, anti-market policy Australia has had for some time.”
The imposition of a gas price cap and the proposal that the government has a say in LNG export volumes could be challenged by foreign investors, global law firm White & Case warned last week.
“The imposition of such measures is not without risk for Australia, which is a signatory to several investment treaties where key LNG companies are incorporated,” White & Case says.
By Tsvetana Paraskova for Oilprice.com
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