Australia’s government is set to impose mandates on LNG producers in the country to set aside a certain percentage of their output for the domestic market to avoid shortages, despite industry opposition.
According to a Reuters report on the news, plans are to set the threshold at between 15% and 25% of production, as a minimum. The curbs would come into effect from 2027, building on the so-called Australian Domestic Gas Security Mechanism that the government of Australia approved back in 2017, giving itself powers to limit exports of liquefied natural gas in order to ensure domestic supply.
Earlier this year, the southern Australian states, which are heavily reliant on gas produced in the east, prompted the government to try to force producers to set aside a certain amount of the energy commodity for the domestic market. Big Oil immediately responded with warnings that this could discourage further investment in the country’s gas industry, which is necessary to boost supply for the future.
However, the east coast of Australia is also vulnerable to supply shortages, and earlier this year, the country’s competition regulator warned the market could swing into a deficit by the end of this year. For now, the shortage has been averted, but the fact that the government is doubling down on LNG export curbs suggests the situation remains tense.
“More affordable Australian gas for Australian users will support our economy and our transition, while remaining a reliable energy partner to our region,” climate change minister Chris Bowen said today in comments on the proposal to mandate domestic gas supply stockpiling. He added that the curbs would only concern new LNG export contracts and would not affect existing commitments to foreign clients. Australia is the world’s third-largest exporter of liquefied natural gas. However, producers have started to curb investments in production expansion, which may be a response to the government mandates.
By Irina Slav for Oilprice.com
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