Australia secures commitment from gas companies to cover demand shortfall

The Australian Government has reached an agreement with gas producers Santos, Origin and Shell in order to secure domestic supply commitments and address scarcity concerns.

In meetings attended by Australia’s Prime Minister, the Deputy Prime Minister, the Energy Minister and the Treasurer, the companies agreed to offer gas to the domestic market to cover the expected demand shortfall next year.

Separate meetings are lined up for next week to negotiate terms in connection with similar commitments for 2019.

Earlier, the Australia Energy Market Operator (AEMO) indicated gas shortages between 54PJ and 107PJ starting next year.

In a move aimed at improving transparency, the companies are also expected to regularly report to the Australian Competition and Consumer Commission (ACCC) on sales and offers by them to sell gas, as well as bids to buy gas from customers that they have rejected.

Australian Prime Minister Malcolm Turnbull said: “One of the big problems in the gas industry, as the ACCC’s report identified on Monday, is that it has been very opaque. There has been very, very little transparency. We are going to bring that to an end by putting the ACCC on the case.

“They, of course, have the ability to investigate with compulsory powers, and they have been able to get behind what is going on in the gas sector and therefore identify the way in which the market is not working.”

Turnbull further blamed the Victoria and New South Wales state governments for failing to tap the potential of their onshore gas resources, resulting in increased cost for households in these states.

He remarked that an additional A$2 per gigajoule is needed to transport gas to Victoria from Queensland.

In April, the government proposed restrictions on gas export to ensure enough supplies to the domestic market.