Queensland to review gas sector

by Energy Action | Jul 16, 2015
The Queensland State Government says it intends reviewing the $2 billion-a-year petroleum and gas industry. Whilst Queensland has enough gas, the Government has concerns domestic users could not access affordable, contracted gas.

The Government, - likely as a result of submissions to the Australian Competition and Consumer Commission’s East Coast Gas Inquiry - has ordered the development of an action plan to find ways to boost supply and lower costs for the gas industry and consumers as Liquefied Natural Gas (LNG) exports from Gladstone ramp up. 

According to the State Development Minister, the review will include gas reservation policies.

The West Australian and Queensland Governments have policies that support the reservation of gas for supply to domestic users, however the Queensland Government does not currently apply this policy.

NSW, South Australia, Victoria, Tasmania, Northern territory and ACT do not currently support gas reservation initiatives.  The Australian Government does not have a domestic gas reservation policy for its offshore resources or national export controls on LNG.

A number of stakeholders in the past, as well as in submissions to the current East Coast Gas Inquiry, have called for a gas reservation policy in eastern Australia. They believe that linking Australia’s domestic gas market to the export market has distorted the domestic market, creating an inefficient allocation of resources and potentially a market failure. They are concerned that without a reservation policy, the domestic market will be supplied with gas at a much higher internationally linked price that is not based on the cost of production.

However gas reservation is not supported by the Australian Government who considers reservation would have negative consequences for the economy. The Government says requiring a proportion of gas production to be reserved for the domestic market would act as a tax on the production of LNG. This would reduce profits from gas production, leading to fewer economic benefits that would not be offset by gains in other sectors of the economy. Less profitable gas production would attract less investment, resulting in reduced gas supply in the longer-term.

 

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