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Minor party strikes deal with Australian government to tighten LNG exports

Sydney — A South Australian minor party has reached a deal with the Australian government which could spell stricter controls for Queensland's LNG exporters.

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The party, Centre Alliance, said Thursday it has worked with the Liberal-National Coalition government on ways to address high energy costs in South Australia. During the negotiations, Centre Alliance agreed to support the Coalition's personal tax cuts legislation, which was a key promise it made in the recent federal election.

"The full package of reforms will be announced by government in the coming weeks, but will include changes to the Australian Domestic Gas Security Mechanism to deal with current pricing, market transparency measures, measures to deal with the monopoly nature of East Coast gas pipelines and longer-term measures to ensure future gas projects deliver surplus supply to the Australian market," Centre Alliance said Thursday.

The party, formerly called the Nick Xenophon Team, said it negotiated with the government for the ADGSM to ensure a minimum domestic supply. "The ADGSM has worked to ensure there is enough supply, but has not dealt with price," it said.

"There has been a market failure and government must intervene," it added.


A spokesman for the Australian Petroleum and Exploration Association said the industry body is waiting for more details and needs to hear directly from the government on the specifics of the deal.

"But we see no need for changes to the ADGSM at this time," he said.

"The Australian gas market is comprised of multiple gas suppliers competing to win local business," he said.

"[The Australian Energy Market Operator's] 2019 Gas Statement of Opportunities has confirmed that the gas market is well supplied until at least 2023," he said, and called for gas resources in New South Wales, Victoria and the Northern Territory to be developed as soon as possible.

Queensland's three LNG export plants -- the Origin-ConocoPhillips' Australia Pacific LNG, the Santos-led Gladstone LNG and Shell's Queensland Curtis LNG -- dodged potential stricter measures when the Australian Labor Party lost in the May election. Labor was planning to put in place permanent LNG export controls which would have had a price trigger. Now the industry faces this new challenge.

In its current incarnation, the ADGSM -- which was brought into effect in July 2017 by the Coalition -- is set to expire in 2023 and due for review in 2020. The restrictions are currently geared to only be applied if the coming year is forecast to experience a shortfall in supply.

In 2018, the three LNG plants in Queensland exported 20.58 million mt of LNG, according to statistics from the Gladstone Ports Corp. They have a nameplate capacity of 25.3 million mt/year and have come under pressure since their development as the region has faced rising gas prices and shortage concerns.


APLNG has agreed to supply 16.2 Pj of addition gas to the domestic market, the Queensland Resources Council said Thursday.

It will provide explosives manufacturer Orica 10.2 Pj of gas over four years starting 2021, and packaging manufacturer Orora will take up to 6 Pj over three years with their option starting from 2023, it said.

APLNG provided around 30% of gas supply to the east coast market and has been a net contributor to the domestic market every year since it formed in 2008, APLNG said.

"Queensland neighbors must take a leaf out of our book, instead of relying on our state to meet the gap caused by their failure to develop their own gas industries. Gas exploration has stalled in New South Wales and Victoria, despite the fact all jurisdictions have their own reserves in the ground," QRC CEO Ian Macfarlane said.

"Last month, APLNG, along with its joint venture partner Armour Energy, announced it would enter into gas supply agreements with a number of Australian manufacturers including Incitec Pivot, with supply agreements totaling more than 50 petajoules of gas," QRC said.

-- Nathan Richardson,

-- Edited by Shashwat Pradhan,