Producers to boost Australia gas supply after export cap threat

Sydney (AFP) –


Major gas producers in Australia agreed Wednesday to boost domestic supplies to help arrest a looming power crisis after the government threatened to slap them with export restrictions.

Australia is expected to overtake Qatar as the world's largest liquid natural gas producer by 2020 -- with Japan, China and South Korea key buyers.

But a focus on exports has left it short of local supplies, with Canberra warning of increased power prices and more blackouts in 2018.

Prime Minister Malcolm Turnbull has this year repeatedly said he would cap overseas shipments if firms did not prioritise the domestic market.

And after a meeting Wednesday with Santos, Shell and Origin Energy, Turnbull said he had won a commitment from them to top up local supplies, averting the need for export restrictions.

"(The companies) have given us a guarantee that they will offer to the domestic market the gas that was identified as the expected demand shortfall, by AEMO (Australian Energy Market Operator), in 2018," he told reporters.

"They?ve indicated or stated that they will provide a similar guarantee over two years -- that?s their intention and will respond further in more detail on 2019 when we meet again next week."

Last week the AEMO projected a dramatic shortfall of gas three times greater than first thought over coming years.

Turnbull blames the crisis on the Labor opposition. which he says backed the development of large LNG export facilities on the country's east coast while in power, without considering the impact on local stocks.

He also accuses state governments, who in some instances have banned gas production on environmental grounds, of contributing to dwindling supplies.

"The failure to develop the onshore gas resources, the gas that is literally under our feet, is costing households and businesses dearly," he said.

Despite being one of the world's biggest coal and gas producers, political debate over energy supply has raged since South Australia suffered a statewide blackout last year and record-high temperatures in recent months put pressure on the national energy grid.

Exporters have also been accused by some analysts of withholding supplies.

The Australian Competition and Consumer Commission (ACCC)has launched an investigation into the industry, with a mandate to improve transparency, something Turnbull has described as a "big problem".

"(The companies) have also given a commitment to provide regular reporting to the ACCC on sales, offers by them to sell gas and bids to buy gas from customers that they have declined," he said. "This is a very, very important step."