Submission calls for further changes to gas reservation scheme design

Australian Energy Producers has called for further changes to the Federal Government’s proposed domestic gas reservation scheme to ensure it supports new gas supply, competition and long-term investment.

In a submission on the exposure draft legislation, Australian Energy Producers reaffirmed its support for a well-designed, prospective gas reservation scheme linked to new supply, while warning that key elements of the proposed framework risked undermining future investment and energy security.

Chief Executive Samantha McCulloch said getting the final design right would be critical to ensuring the scheme achieved its intended objectives.

“The Government has made some important improvements to the proposed reservation scheme, but critical flaws must be addressed for the reservation scheme to work,” Ms McCulloch said.

“As currently proposed, the scheme risks crowding out domestic-focused producers, reducing competition and diversity of supply, and discouraging investment in future gas supply.

“This is a fundamental market reform that should be designed for the long-term. Artificially oversupplying the market may deliver a short-term sugar hit but it will come at the expense of investment that will only add to future price pressures and energy security risks.”

Key changes sought include:

• Replace the effective forced sale requirement with a genuine offer obligation.

• Calibrate domestic supply obligations to deliver a balanced market without oversupply.

• Prevent deferred supply obligations from creating future oversupply or distorting the market.
• Ensure Western Australia’s existing reservation framework is not undermined or overridden by the national scheme.
• Recognise genuine and ongoing infrastructure constraints.
• Narrow and clarify ministerial discretion.
• Provide certainty on production baselines and additional gas.
• Establish a proportionate, graduated and risk-based compliance regime.

“A reservation scheme should strengthen competition and encourage new supply, not force gas that is not needed into an already well-supplied market at the expense of producers that have invested specifically to supply Australian customers,” Ms McCulloch said.

“The final framework must ensure Australian customers have access to the gas they need while supporting the long-term investment required to ensure Australian households and business continue to have access to reliable and affordable gas.”

Read the submission here.