The Albanese Government's controversial new reservation policy could backfire and actually cause supply shortfalls, the peak body for Australia's oil and gas sector claims.
Policy details and concerns
Under the plan unveiled in last week's Federal Budget, LNG exporters will be forced to quarantine 20 per cent of their gas exports from July 1, 2027 for the domestic market. Details are scant ahead of final consultation through June and July, including how the legislation will interact with Western Australia's 15 per cent domestic gas reservation policy introduced in 2006 by the Carpenter Government.
Australian Energy Producers chair Cecile Wake will use the nation's biggest industry event in Adelaide on Tuesday to urge the Commonwealth to ensure the plan is "carefully calibrated". She said it had to ensure reliable supply to local markets and regional trade partners, encourage investment and provide certainty for WA LNG operations that were not connected to the east coast market, where the policy aims to ease a forecast shortfall.
Industry warnings
"As we stand today, the details announced fall well short of those objectives," Ms Wake, who is Shell Australia's country chair, will tell AEP's annual conference. "It is in everyone's interests that we work together to design a policy that does not repeat the mistakes of past interventions that have distorted the market, dampened investment, unsettled trade partners, and failed to deliver more supply or lower prices."
"A poorly designed or poorly calibrated scheme that results in a structurally oversupplied domestic market or imposes forced sale requirements will undermine investment in new supply and exacerbate future supply shortfalls."
The latest numbers from the Australian Energy Market Operator showed the east coast was expected to be well supplied until at least 2030 — so there was time to get the policy right, Ms Wake said.
Government approach
Ms Wake did give credit to the Albanese Government for "calling out the misinformation" and "staring down the reckless campaign" to whack a 25 per cent tax on gas exports in the budget. She had firmly pushed back against the proposal at a Greens-led Federal parliamentary inquiry last month, describing it as "spectacularly ill advised" and helping to ensure it was ruled out even before hearings were complete.
"The fact is that our existing tax system is already designed to collect more tax when company profits increase, ensuring a fair tax return for Australians," Ms Wake will tell the conference.
Industry event
Raising the curtain on the near week-long event, AEP chief executive Samantha McCulloch said the stakes for Australia's future energy security had never been higher. Amid ongoing conflict in the Middle East, ANZ Research said global oil markets were increasingly reliant on inventories to offset supply disruptions, with both crude and product stocks projected to decline steadily under current assumptions.
