Australian Government Strikes New Agreement With Exporters to Secure Gas Supply for Domestic Market

Australian Federal Resources Minister Madeleine King addresses the media alongside Prime Minister Anthony Albanese in Kwinana, Australia, on March 4, 2021. (Paul Kane/Getty Images)

The Australian government has reached a new agreement with major gas exporters to secure sufficient gas supply for the domestic market in 2023.

On Sept. 29, Resources Minister Madeleine King signed a new heads of agreement with several large gas companies after weeks of negotiation.

Under the new agreement, uncontracted gas would be offered first to Australian buyers for reasonable supply periods to prevent a shortage in the domestic market.

In addition, liquefied natural gas exporters would supply an extra 157 petajoules (one petajoule equals 278-gigawatt hours) to the domestic market in 2023.

The figure is nearly three times the amount of gas that the domestic market is expected to be short (56 petajoules) according to a previous forecast for 2023 by the Australian Competition and Consumer Commission.

Safety flares are shown at the Woodside operated North West Shelf Gas Venture in Western Australia, on June 17, 2008. (Greg Wood/AFP via Getty Images)

Furthermore, King said the agreement ensured that Australian customers would not be paying more for the uncontracted gas than international buyers.

“This agreement will ensure Australians continue to have access to secure and reliable gas,” she said.

“The new supply commitments and heads of agreement will deliver gas to the domestic market when needed and ensure future uncontracted gas will be offered to the domestic market first.”

King also mentioned that she would meet every quarter with gas exporters to ensure they meet their commitments and follow the code of conduct specified in the agreement.

New Agreement Prevents Minister from Pulling The Gas Trigger

As the negotiation concluded, the minister said she did not need to pull the trigger on Australia’s domestic gas supply mechanism, which would have limited exports and required companies to find new gas sources.

Prior to the signing of the head of agreement, Japan’s ambassador to Australia reportedly warned that any reduction in gas export to Japan due to the activation of the mechanism would affect the relationship between the two countries.

Meanwhile, King said the new agreement would not affect the supply of Australian gas to international markets and the contracts already in place.

“This is a great outcome for Australia, will strengthen confidence in the domestic gas market and safeguard our global reputation as a stable and reliable energy exporter to our regional partners,” she said.

This year, gas shortages in several Australian states threatened to drag the country into an energy crisis after many aging coal-fired power stations suffered unexpected outages and went offline.

Despite the shortage in power supply, Australians in Queensland and New South Wales narrowly averted widespread blackouts after the Australian Energy Market Operator stepped in and compelled energy companies to continue to produce and sell electricity despite operating at a loss.