Malcolm Turnbull forced to clarify that though wholesale costs may halve under plan, prices paid by households will not

Gas producers have labelled the government’s imposition of export controls an “almost unprecedented” sovereign risk that threatens investment in gas production that would increase supply.

But Australian industrial gas users, represented by the Australian Industry Group, have cheered the “bold” changes to secure domestic supply.

Malcolm Turnbull initially said gas prices should halve as a result of new export restrictions announced on Thursday but was forced to clarify that wholesale prices may halve but retail prices paid by households would not.

Under the plan the government would gain a power to impose a limit on exports, acting on advice from the Australian Energy Market Operator and the competition regulator that a shortage existed.

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The Australian Petroleum Production and Exploration Association chief executive, Malcolm Roberts, said that the move was “almost unprecedented for Australia”.

“At a time when we need billions in new investment to create more gas supply, any intervention which creates sovereign risk is alarming.”

He said the industry would consider the details of the announcement in the “very short consultation period” before they come into effect on 1 July.

Roberts accepted that the east coast gas market was “tight” but blamed regulations imposed by the New South Wales, Northern Territory and Victorian governments preventing development of gas projects. “The only solution is more gas, not more regulation.”

The Australian Industry Group chief executive, Innes Willox, said the introduction of export controls was “an appropriate and welcome response to an extraordinary crisis”.

Willox said the policy gave the gas industry flexibility “to make commercial agreements to fill the hole in domestic supply due to the over-commitment to exports”.

“We are hopeful that the government’s intervention will see the gas supply and price crisis ease in the near future – and that these steps will also take pressure off electricity prices.”

AiGroup has called for the government to facilitate swaps to allow more gas to be used by domestic industry and has long advocated a national interest test for exports.

In an interview with ABC Brisbane, Malcolm Turnbull said lifting bans on exploration and production would provide a long-term solution but the export controls would help protect Australian jobs in the short term.

The prime minister said the policy would ensure that the price of gas in Australia was comparable to levels in the international market.

“It will be cheaper than the prices that are being offered now. People are being offered prices of $20 a gigajoule. It should be around half that or less.”

At a press conference on Thursday Bill Shorten seized on the comments, claiming Turnbull had said that “under him gas prices will halve, for industry, for householders”. “Mr Turnbull needs to explain exactly when gas prices will halve.”

Responding to gas producers’ claims the export limit would harm production, Shorten said new fields had to be developed but “we’ve got a crisis right now … just focusing on that is like promising a drowning man that you will build a boat, it will be too late”.



At a later press conference, Turnbull clarified that if the wholesale price for gas in Australia was based on the export price “it would be less than half $20”.

“This is not saying that all gas prices will be halved as a result of these changes,” he said. “Wholesale gas, for example, if you’re a household, a family, the wholesale price of gas is between 15 and 20% of the cost on your gas bill because the gas company has to get the gas to you.”

Turnbull has said the policy would affect exporters who were not net contributors to the domestic market – that is, they drew more from the market than they put in.

“They will be required to outline how they will fill the shortfall of domestic gas as part of their overall production and exports,” he said.

Shell’s Queensland Curtis LNG and the Origin Energy-led Australia Pacific LNG are both net suppliers of gas into domestic markets and are unlikely to be impacted.

The policy is expected to have the biggest impact on Gladstone LNG because, according to Santos’s own figures, the project used its own product for just 43% of the LNG it exported in the last quarter, relying on third-party gas supply to meet export contracts.

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Gladstone LNG is a joint venture in which Santos has the largest stake (30%), followed by Malaysia’s Petronas, which owns 27.5%, Total with 27.5% and Korea’s Kogas, which owns 15%.

The Tax Justice Network has noted that one-third of Queensland’s LNG capacity will be owned by foreign governments through state-owned enterprises by 2020, arguing that Australia has failed to secure its own gas supply that has been snapped up by countries.

In a statement to the Australian Securities Exchange after its shares dropped more than 6%, Santos noted the policy announcement and said it would “seek clarification” of how it would work in practice and how offers to boost domestic supply were being considered.

“As an Australian company, Santos has been a long-term supplier of natural gas at affordable rates in support of the domestic market.”

Santos promised “to supply more gas into the Australian domestic market than it purchases for its share of LNG exports”.