LNG giants worry export curbs as east coast provide doubts deepen

East coast fuel producers worry they may quickly be ordered to interrupt long-term export agreements amid warnings that fossil gas value caps will stunt new provide initiatives and improve the necessity for regulators to make use of emergency powers to avert future winter shortfalls.

The Albanese authorities final week handed new legal guidelines designed to tame hovering vitality payments, together with limiting uncontracted home fuel costs at $12 a gigajoule for 12 months, and introducing a compulsory code of conduct with powers to make sure “affordable” fuel contract costs past subsequent yr.

Pure fuel costs are tipped to surge one other 40 per cent by 2024, piling strain on gas-connected properties and companies, as a result of conflict in Ukraine igniting competitors for Australian provides of liquefied pure fuel (LNG).

Nonetheless, the federal government’s transfer has sparked a livid response from the fuel trade, which argues funding can be pushed away from crucial new drilling initiatives which might be wanted to shore up native provides and substitute the quickly declining offshore fuel fields within the Bass Strait.

There at the moment are rising issues throughout the sector that the legal guidelines will elevate the specter of future shortfalls in peak winter months and depart the federal government little selection however to limit exports from the Queensland LNG ventures of Origin Power, Shell and Santos beneath a coverage often known as the Australian Home Fuel Safety Mechanism (ADGSM).

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“This winter or the one after, the federal authorities must determine between rationing fuel and breaking LNG contracts,” Santos managing director Kevin Gallagher mentioned.

Whereas Australia is without doubt one of the world’s prime shippers of LNG, most of it’s produced within the nation’s north and is bought on long-term contracts to consumers in China, Japan and Korea. The Australian Power Market Operator (AEMO) has issued warnings about winter gas-supply “shortage dangers” rising in southern states within the coming years as output from legacy offshore fields dries up.

Graeme Bethune, of Adelaide-based vitality consultancy EnergyQuest, mentioned the federal government’s emergency intervention would worsen the enterprise circumstances for a number of new east-coast provide initiatives, together with Woodside and ExxonMobil’s ongoing investments in sustaining Bass Strait output, Santos’s Narrabri coal-seam fuel growth, and proposals to construct specialised transport terminals to start importing cargoes of LNG.