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PM strikes deal for gas guarantee

PM strikes deal for gas guarantee

Australia’s biggest gas exporters have given the Turnbull government a guarantee that they will offer the 107 petajoules identified as the expected gas shortfall next year to the domestic market.

Prime Minister Malcolm Turnbull, his deputy Barnaby Joyce, Energy Minister Josh Frydenberg and Treasurer Scott Morrison today met the heads of gas giants Origin, Santos and Shell, after experts warned of a gas shortfall in 2018 equating to enough electricity to power 100 regional cities for a year.

Mr Turnbull said the companies had indicated they would guarantee to overcome any shortfall over the next two years, with the details of the plan to be fleshed out in a further meeting next Tuesday.

“They have stated that they will offer first, as a first priority, domestic customers any uncontracted gas in the future as a priority,” Mr Turnbull said.

“They have also given a commitment to provide regular reporting to the ACCC on sales, offers by them to sell gas and bids to buy gas from customers that they have declined. This is a very, very important step.”

Mr Turnbull said one of the problems in the gas industry had been a lack of transparency.

“We will bring that to an end by putting the ACCC on the case,” he said.

“They have the ability to investigate, with compulsory powers, and they have been able to get behind what is going on in the gas sector and, therefore, identify the way in which the market is not working.”

Mr Turnbull sought to put pressure on state governments who have moratoria on gas exploration, singling out Victoria and New South Wales.

“I want to make one very clear and obvious point. Whatever the price of gas is in Queensland, because Queensland is where most of the gas is now being produced on the east coast, it is going to be more expensive in Melbourne because of the cost of getting it there,” he said.

“The failure of Victoria and New South Wales to unlock their onshore gas resources means more gas will have to be shipped south at greater expense.

“It will mean that Victorians and residents of New South Wales will be paying more, an extra $2 a gigajoule, which is around the cost of shipping gas from Queensland. It is about 11% on the gas bill of a typical household in Melbourne.”

Mr Joyce dismissed Labor calls for the government to “pull the trigger” and restrict gas exports with an analogy about police.

“I see policemen every day and they have a car, a siren and they have flashing lights and they have a holster on their hip,” he said.

“We don’t expect them to use it every day. We expect them to use it if required, when needed.

“As a government, we are effective in dealing with the issues before us. We have movement. We are getting further movement and further meetings will happen on Tuesday. This shows what competent Government looks like. If you want to know what a disaster looks like, it looks like South Australia with electricity.”

Mr Frydenberg said there was no point in Australia becoming the world’s largest LNG exporter if the local community went short.

“That is why today’s meetings and the commitments that have been secured are so important for Australian workers and Australian families,” he said.

“The commitments from the companies today do not let the states and the territories off the hook.

“New South Wales imports more than 95 per cent of its gas, virtually all the gas that is produced in Victoria comes from offshore commonwealth waters given the Andrews government’s mindless moratoriums and bans on onshore conventional and unconventional gas extraction. We know that the NT is sitting on 200 years worth of gas resources. Gas is critical to Australian businesses, it is critical to Australian families, that is why today’s meeting was so important.”

Mr Turnbull said the government had made it clear it was prepared to exercise its powers to control exports if the gas companies did not agree to address the shortfall.

Mr Frydenberg said the ACCC had found that household electricity bills in Victoria could be 11 per cent cheaper if gas was sourced locally with the cooperation of the state government, rather than from Queensland.

“The ACCC have indicated that to ship or pipeline gas from Queensland to Sydney is about $2 a gigajoule. To Victoria it is $2.24 a gigajoule and it is just over $1.60 to SA,” he said.

“The clear preference is to get gas produced in the areas in which it is needed for the families and for the businesses in those states.”

Shell Australia chairman Zoe Yujnovich said her company understood that public support for a gas export industry was dependent on Australian customers having access to a reliable and affordable gas supply.

“Shell is committed to supply wholesale gas customers through the newly established Shell Energy Australia business,” Ms Yujnovich said.

“We have established this new business in Melbourne because we saw an opportunity to sell gas from Queensland to customers in the south east, and in the process insert much needed competition into a market with very few players.

“The company is committed to understanding demand in the market, securing gas supply and selling more gas to customers.

“To help prospective customers get certainty on gas for supply for 2018, we need to speak to them as soon as possible.

“We welcome customers identified by the ACCC as not being able to secure contracts to speak to us - and in return we commit to share all offers with the ACCC.”

The Australian

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