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Gas in reserve ‘key to cutting prices’

Australia’s big energy users are still paying high prices for domestic gas supplies, triggering ¬renewed calls from Centre ¬Alliance senator Rex Patrick for a reservation scheme to be rolled out on the east coast.

The consumer watchdog warned on Tuesday that high gas prices were forcing factories to shut and companies to go into liquidation. It said domestic tariffs had not fallen despite a continued decline in international LNG prices this year.

Senator Patrick — who wrangled a commitment from the ¬Coalition to roll out a reservation scheme in exchange for his support of the government’s personal income tax cuts package — said he was disappointed local gas prices remained high. “Australia has an abundance of gas. That should translate into lower energy costs to Australian businesses to give them a competitive edge, but it hasn’t,” he said. “Instead, our international competitors are getting our gas at cheaper prices than we get our gas, and that’s unacceptable.”

The reservation scheme would see the east coast replicating a system similar to that in Western Australia to provide relief for big gas users still struggling with high tariffs. WA’s regulations require 15 per cent of gas reserves at LNG export projects to be set aside for use within the state. The government in January said it would be “mindful” of the contribution LNG exporters in Queensland had already made to ensuring domestic energy security when setting state-by-state policies.

“As the national reservation policy is designed, we need to ¬ensure that we don’t have a situation where cheap Australian gas is sold for export and expensive Australian gas is reserved for sale to the local market,” Senator Patrick said.

Big LNG exporters, including Santos, Origin Energy and Shell, stand to be impacted by the new reservation policy. The government has also committed to retain the Australian Domestic Gas ¬Security Mechanism until 2023.

The scheme can direct Queensland LNG exporters to ¬divert supplies to the local market if a shortfall is forecast for the following year. It was created as a ¬response to tight domestic supplies on the east coast and reduced production from the offshore Bass Strait fields in Victoria, but has not yet been triggered since it was introduced in July 2017.

While the government said the ADGSM had helped in halving gas prices to $10 a gigajoule from more than $20 a gigajoule in early 2017, it has recommended a number of changes following a formal review of the mechanism. The competition regulator’s forward LNG netback price will now be part of deliberations when the government determines if there is a case to trigger the export mechanism.

Source: The Australian