Australia is one of the three largest exporters of LNG in the world along with the United States and Qatar. Now a decision appears on the mini-continent that could once again undermine the global gas economy that is already suffering from uncertainty due to the crisis in Ukraine.
In Australia, they are currently discussing the question of whether to curb the export of liquefied natural gas (LNG) in light of fears of shortages and high prices next year. The discussion in the government began after the recommendation of the Competition and Consumer Commission (ACCC) which warned that excess gas is needed to deal with the decrease in the output of the marine gas reservoirs that provided the consumption of the east coast where nearly 90% of the country’s population lives.
Resources Minister Madeleine King said she would consult with gas exporters and trading partners before making a decision. The ACCC’s decision recommendation is based on the 2017 law that allows Australian gas producers to be forced to divert their goods to the domestic needs of East Coast residents in the event of a shortage. “Our latest gas report found that the outlook for the gas market on the East Coast has worsened,” said Gina Cass Gottlieb, chair of the committee. The committee is not only concerned about the forecast for 2023 but recommends that the gas producers immediately increase the supply to the Australian market.
The increase in domestic demand for gas in Australia comes against the background of production stoppages at coal-based stations and against the background of the increase in demand for heating. The increase in demand has already led to an increase in the price of gas and electricity and almost caused a blackout in Eastern Australia in June. The increase in prices increased the pressure on the new government led by the Labor Party when, in addition to the high prices for the consumer, manufacturers using energy based on gas threatened to stop the work of factories and lay off workers. Finance Minister Jim Chalmers said that “it is critical that our domestic gas supply is secure and competitively priced, especially when households and businesses are under extreme pressure.”
There is, therefore, considerable pressure in Australia to make a decision that will limit exports and possibly harm the world trade in natural gas. At the same time, Resources Minister King emphasized that there is no point in breaking Australia’s long-term contracts with other countries and harming the country’s extensive export industry. “We want to be known and remain known, as the situation is now, as a reliable trade partner” said the minister. In addition, pressure is also expected on the issue of saving jobs in the gas industry from King’s party. Shaul Kaunik, an analyst at Credit Suisse Bank said: “We expect the government to declare a gas shortage in 2023 and tighten the regulatory framework, but ultimately seek a voluntary agreement that the LNG producers in Queensland agree to maintain supplies to the local market in the face of any possible shortage next year.”
A decision on export restrictions, if accepted, may have a certain effect on the global gas economy, which has been under price pressure in recent times due to the invasion of Australia. In principle, there should not be a direct impact on the gas economy in Europe since Australia mainly exports to China, Japan and South Korea, while Europe’s gas sources are other. At the same time, there can be an indirect effect on the volatile gas market as well, when the countries that have received gas from Europe until now will compete for other gas sources and raise prices indirectly.
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