Australian Government Looks to Avert Gas Crisis

Australian Government Looks to Avert Gas Crisis
Australian Federal Resources Minister Matt Canavan was at pains to emphasize that the controversial 'Domestic Gas Security Mechanism' would only be triggered as a last resort.

Australian Federal Resources Minister Matt Canavan was at pains to emphasize that the controversial ‘Domestic Gas Security Mechanism’ would only be triggered as a last resort to secure domestic gas supplies at the expense of LNG export cargoes.

Speaking at the APPEA Conference in Perth, Senator Canavan said the mechanism, set to be implemented by July 1 by the Commonwealth Government to avert a disastrous, looming energy crisis in the east coast, was not an ideal system “that I or the government welcomed or preferred. But we believe it is an appropriate, targeted and temporary response to the issues we are facing.”

The system has been criticized as posing a sovereign risk threat to Australia that could stain the country’s status as a safe investment destination.

However, with east coast LNG gas plants in Gladstone ramping up to full export capacity of 2000 petajoules - in the process hoovering up stretched domestic production, creating a gas shortfall in the east and spiking domestic prices - Sen. Canavan said: “The Federal Government cannot sit idly by while jobs are lost because people are paying higher gas prices here in Australia than they are in our major export markets in North Asia. So we have stepped in to produce a gas exporting license system.

“Restrictions will only apply where a gas shortage is identified and only apply to export operations that are in effect drawing down from our domestic gas sources in net terms. We have designed the scheme to be precisely targeted at the problem the east coast gas market faces. I know there has been criticism that it is too targeted at groups and companies, but I reject that outright.”

He added that the Commonwealth government would be lobbying Victoria, New South Wales and the Northern Territory to lift onshore drilling, exploration and hydraulic stimulation bans that had accelerated gas shortages close to manufacturing centers, notably close to Melbourne and Sydney.

“The answer to shortages and higher prices normally would be more supply. But that’s not happening right now, because of the ridiculous and stupid moratoria we see here in Victoria, the Northern Territory and New South Wales, which are completely lacking in science, reason or logic. But they have come into place, they are there and we must deal with them,” Sen. Canavan said.

He said that states that continued to maintain moratoria on exploration and drilling would find themselves at the back the queue accessing $90 million in funds the Federal Government had committed to stimulating exploration and production.

“The first step is to try and encourage State and Territory governments to remove the blanket moratoria that exists. Those states which have blanket moratoria in place are going to be at the back of the queue and states where there are already attractive gas productions and regulations in place will be at the front of the queue,” Sen. Canavan said.

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