Australian Energy Producers Chief Executive Samantha McCulloch
The Federal Government has made a number of sensible changes to the proposed design of a domestic gas reservation, including calibrating the reservation requirement more closely to domestic market needs.
The exposure draft released today also appears to provide greater certainty for Western Australia and the Northern Territory by recognising existing state schemes and linking the supply obligation to physically connected domestic gas markets.
However, the proposed 110% oversupply of the east coast gas market will destroy investment signals and crowd out smaller, domestic-focused producers. Forcing around 50 PJs of additional gas into the domestic market is not a “moderate oversupply”: it is equivalent to almost all industrial gas use in Victoria.
The “must sell” requirement exacerbates these risks. Producers should not be forced to sell gas below cost or on non-commercial terms.
A domestic reservation policy that results in less competition and less investment is not in the national interest. Ultimately, it will mean higher prices and greater risk of future shortfalls.
Australian Energy Producers supports a well-designed, prospective reservation policy that provides long-term certainty for gas users and producers. We will continue to work with the Federal Government to ensure a sustainable and enduring framework that promotes investment in new supply and maintains a competitive domestic gas market.
We also welcome the Coalition’s commitment to work constructively with the Government on a final design that is fit for purpose and supports investment in new supply.