The Australian government is planning to block LNG exports if there isn't adequate supply of gas domestically, Prime Minister Malcolm Turnbull announced on ABC Radio Thursday morning local time.
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Exactly how the mechanism will work is not clear yet, but comes in response to concerns that the eastern seaboard of the country could face gas shortages by the end of the decade.
It follows meetings between the Federal Government and top executives from the country's gas companies in recent weeks, during which two of the three east coast LNG exporters -- Australian Pacific LNG and Queensland Curtis LNG -- committed to being net suppliers to the domestic market.
Santos, the operator of the third east coast LNG exporter, Gladstone LNG, on Thursday said, that moving forward, it will supply more gas into the domestic market than it purchases for its share of LNG exports.
"Santos will seek clarification of how the new policy will work in practice in order to understand from the government the terms on which it is proposing to introduce this mechanism and how proposals that have been put to the government to address the domestic market situation are being considered," it said in a statement in response to the announcement.
In the January-March quarter, Santos' share of GLNG sales was 400,900 mt, with its own product making up 172,900 mt of the sales and third party product contributing 228,000 mt, the company said last week.
APLNG CEO Warwick King said Thursday that while the company reaffirms its commitment to be a domestic net contributor -- and that it has been since its inception in 2008, it does not support the government's move.
"In the past six months, APLNG completed more than 100 domestic gas transactions, many with Queensland manufacturers, supplying 62 petajoules on long term contracts and a further 20 PJs in incremental sales," he said.
"APLNG does not support additional regulation such as export permits, as these sorts of interventions will not increase supply or decrease price in the near or long term," King said.
"Australian energy market challenges can only be resolved by engaging with all the energy sector. Producers, explorers, transporters, and retailers, not just the Queensland LNG industry, need to work collaboratively together to address ongoing concerns," he said. Turnbull said the move could potentially more than halve domestic gas prices.
"We've seen that because of these anticipated shortfalls, gas suppliers have been proposing contract prices which are really way too high. They are as much as four or five times the price per gigajoule ... that are being offered in the United States," Turnbull said.
"[Under the new measures, gas] will be cheaper than the prices being offered now. Now people are being offered prices of [A]$20 a gigajoule. It should be half that or less," he told ABC radio.
The Platts JKM for cargoes to be delivered in June was assessed at $5.75/MMBtu on April 26, down 41% since the start of 2017. The Platts JKM averaged $7.02/MMBtu for the first three months of the year.
The Australian Petroleum Production & Exploration Association said the export controls are a short-term measure that risk exacerbating tight market conditions unless accompanied "by genuine reforms."
"There is no doubt the east coast gas market today is tight," APPEA chief executive Malcolm Roberts said Thursday.
He said the main issue is that state governments, such as New South Wales and Victoria, are preventing the exploration and development of new gas supplies.
"The only way to ensure long-term energy security is to remove restrictions and make it possible for explorers to find new gas fields and producers to develop these resources. The only solution is more gas, not more regulation," Roberts said.
--Nathan Richardson, firstname.lastname@example.org
--Edited by Geetha Narayanasamy, email@example.com