Australian government signs deal with east coast LNG producers [Update]
The Australian government has signed a new heads of agreement with the three east coast LNG exporters to ensure sufficient gas supplies for the domestic market, it said on September 29. The new commitments from LNG exporters will lead to an extra 157 petajoules for the domestic market in 2023, with the gas to be supplied in line with seasonal demand.
The new heads of agreement was signed by resources minister Madeleine King and representatives from Australia Pacific LNG (APLNG), QCLNG and Gladstone LNG (GLNG).
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“This agreement will ensure Australians continue to have access to secure and reliable gas,” King said. “The new supply commitments, and heads of agreement, will deliver gas to the domestic market when needed, and ensures future uncontracted gas will be offered to the domestic market first, on competitive and reasonable terms, before it is offered for export.”
In July, the Australian Competition and Consumer Commission forecast a gas shortfall of 56 petajoules for the domestic market in 2023.
According to the heads of agreement, LNG exporters have to first offer uncontracted gas to the domestic market, on competitive terms, with reasonable notice, before exporting. In respect of uncontracted gas, domestic gas customers will not pay more for the LNG exporters’ gas than international customers.
King said there was no intention to invoke the Australian Domestic Gas Security Mechanism (ADGSM). A decision on using the trigger had to be made before October 1.
“Given the agreement means the projected shortfall will be avoided, I am satisfied I do not need to take steps to activate the Australian Domestic Gas Security Mechanism at this time,” she said.
The ADGSM gives the federal government the power to impose LNG export curbs. If the government assesses that there will be a shortfall in domestic gas supply in a calendar year and that LNG exports contribute to the shortfall, the exports will be restricted for that year. Since the introduction of the ADGSM in 2017, the Australian government has not declared a domestic shortfall year.
Santos, which operates the GLNG project, said the agreement will have no adverse impact on the company or the GLNG project.
“The heads of agreement is a good outcome for Santos and very welcome to remove sovereign risk and ensure long-term LNG supply contracts are honoured," Santos CEO Kevin Gallagher said. "The only long-term solution to energy security is investment in new gas supply sources to support the energy transition while renewables, batteries and many other necessary low emissions technologies are developed and deployed at the required scale."
Shell, which owns QCLNG, said the revised heads of agreement attempt to strike the right balance by giving the market confidence that there will be gas available from Queensland at a competitive price in the near term.
"We are committed to working with the government to help identify new domestic and international supply solutions that can be delivered at adequate scale into southern locations in the short to medium term," Shell said.
(Update adds comments from Santos and Shell )