Australian Government Secures 300 PJ Gas Deal to Prevent Forecasted Shortage

A gas burner working. (Fred Tanneau/AFP via Getty Images)

The Australian Labor government has struck a deal with two energy companies to prevent a forecasted significant gas shortfall in the short term.

APLNG and Senex will be responsible for supplying 300 petajoules of gas–equivalent to two years of east coast industrial usage–to the domestic market by 2030, of which 140 petajoules will be delivered by the end of 2027.

Federal Energy and Climate Change Minister Chris Bowen said the deal would help preclude projected gas shortages by 2027.

“The energy market operator and ACCC (Australian Competition and Consumer Commission) have warned that we will not have enough gas to power factories, generate power, cook, and heat homes in 2027,” he said in a statement.

“These supply agreements help guard against that outcome and are crucial for avoiding a serious problem.”

APLNG’s and Senex’s commitments to deliver extra gas are enforceable under the mandatory code of conduct for the gas industry introduced by Labor, which managed to pass the parliament on Nov. 27 despite obstructions from the Greens and crossbenchers.

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The two companies are exempt from the pricing provisions of the gas code, providing them with regulatory certainty over their investment and development plans to stabilise prices.

After the gas code passed in parliament, Mr. Bowen said the outcome was a “win for Australian energy users.”

“The new commitments will provide more affordable gas to the Australian market in the short to medium term and will provide the energy security that Australia needs as it makes its transition to net zero emissions,” he said.

The minister also criticised the Greens for their “reckless and pointless” obstructions, saying they put the domestic gas supply, prices, manufacturing jobs, and the energy transition at risk.

Meanwhile, Northern Australian Resources Minister Madeleine King stated that gas would continue to play an important role in maintaining the stability and reliability of Australia’s energy system.

“The flexibility of gas as a firming fuel and as essential manufacturing and minerals processing input will be required as the transition accelerates domestically and in our region,” she said.

Response from Relevant Parties

Following the government’s announcement, the Greens said Labor was gaslighting the public by taking climate action while opening new coal and gas mines amid a “climate crisis.”

“Labor’s gas code gives big corporations a financial incentive to open new gas fields,” Greens Leader Adam Bandt said.

“Gas is as dirty as coal, and every new Labor gas development puts us on track for an unliveable climate future.”

The leader also believed that there was sufficient gas in Australia to allow the country to transition to net zero without the need for new gas fields.

Australia's Climate Change and Energy Minister Chris Bowen attends the G20 Energy Transitions Ministerial Meeting in Nusa Dua, Indonesia, on Sept. 2, 2022. (Made Nagi/Pool/AFP via Getty Images)

While the Coalition did not support the Greens’ attempt to block the gas code, it criticised Labor’s “heavy-handed” interventions and policies in the gas market since the party came into power in May 2022.

“Despite the clear negative impacts that the process of introducing this code has had on the sector and natural gas supply, the Coalition will not be supporting the Greens’ disallowance motion as the industry has already experienced significant uncertainty over the last 15 months and has made very clear their opposition to abolishing an existing framework without considered reform,” Opposition energy spokesperson Ted O'Brien said.

“Today’s announcement by the government of further exemptions for gas companies demonstrates that even Labor realises their interventions have been so damaging that they needed to exempt gas companies from their own code in order to guarantee supply.”

In December 2022, the Labor government introduced a wholesale gas price cap of $12 (US$8) per gigajoule to tackle soaring domestic energy prices.

Despite the government’s intervention in the gas market, Australian consumers were still hit with considerable price hikes.

The price cap also resulted in significant market uncertainty, causing many gas producers to stop taking new contracts for a period of time.

Energy experts warned that Labor’s energy policies would dismantle the gas market and make the situation worse for households and manufacturers.