Households and businesses on the east coast of Australia will avoid being hit by looming shortages of gas in 2018 and 2019 after the Turnbull government and LNG exporters inked a deal to secure additional supply over the next two years.
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Prime Minister Malcolm Turnbull and senior representatives from Shell, GLNG Operations and Australia Pacific LNG formally signed off on the deal on Tuesday in Canberra, following a joint warning from the Australian Competition and Consumer Commission and the Australian Energy Market Operator of an expected gas shortfall of 54 petajoules in 2018 and 48 petajoules in 2019.
To avoid the forecast shortage in 2018, which would have put further upward pressure on already high gas prices, the federal government and the companies last week reached an in-principle agreement to supply additional gas to the market in 2018.
A deal was struck to ensure the extra gas needed in 2019 would be supplied by the companies, on "reasonable terms".
"We hope that through the Heads of Agreement, indeed we can find a path forward to make sure that the domestic market is serviced and that indeed there is enough available gas for the market, which we stand behind and are committed to deliver," Mr Turnbull said.
Shell Australia's country chair Zoe Yujnovich praised the constructive dialogue with the government after "some difficult and tense moments".
Australia Pacific LNG chief executive Warwick King said the agreement today will resolve concerns.
"Looking ahead it is absolutely vital that Australia adopts a whole of market solution to resolve new gas supply, including reforms to improve the Australian domestic gas market and the responsible development of additional gas resources near to the demand centres of Sydney and Melbourne," Mr King added.
Industry welcomed the announcement, but remained cautious.
"There are two big questions from here," Australian Industry Group chief executive Innes Willox said.
"Will we make the most of this opportunity to secure the market for the longer term, including by reforming State gas moratoria? And will prices fall to export parity quickly? Contract prices offered to gas users appear to have fallen from the highs of early 2017, but remain well above historic levels. Energy users will be looking for further falls as more uncontracted gas is offered locally."
Labor resources spokesman Jason Clare said the real test for Mr Turnbull was whether the deal with gas companies would halve the price of gas, from $20 to $10 gigajoule, as the Prime Minister had suggested was possible in April.
"Six months later he still hasn't delivered. Companies today are still being offered contracts of $15, $16, $17 or $18 a gigajoule," Mr Clare said.
The Energy Users Association of Australia agreed, with a spokeswoman telling Fairfax Media "the big issue is at what price will they offer this gas".
"The EUAA looks forward to playing a key and active role to support the ACCC's monitoring role of gas prices offered to our members. This will be the true measure of the effectiveness of the gas companies' commitments."
