(Adds KOGAS, analyst comments)
By Sonali Paul
MELBOURNE, April 27 Australia's conservative
government unveiled a radical plan on Thursday to restrict
exports of liquefied natural gas (LNG) at times when domestic
shortages push up local prices, aiming to ease soaring energy
costs for local manufacturers.
The plan would allow Australia's resources minister to
impose controls on LNG exports on advice from the market
operator and regulator, as the government seeks to cap domestic
gas prices, which have become a political hot potato.
"It's not a threat. This will be export controls. They will
not be able to export gas if that has the consequence of
reducing the availability of gas for the Australian market,"
Prime Minister Malcolm Turnbull told Australian Broadcasting
Australia is the world's second-largest LNG exporter after
Qatar, but local gas prices have rocketed over the past two
years with the start of LNG exports from three newly built
plants in eastern Australia to customers in China, Japan, Korea
The government's move, due to take effect on July 1, drew a
swift rebuke from gas producers, who called instead for curbs on
onshore gas exploration to be lifted to help boost supply.
"Restricting exports is almost unprecedented for Australia,"
said Malcolm Roberts, chief executive of the Australian
Petroleum Production and Exploration Association.
The Australian Energy Market Operator warned in March of a
shortage set to hit eastern Australia, and the government and
some companies have already taken steps to ensure sufficient gas
for power plants at peak times.
Analysts questioned whether the government's plan would lead
to lower gas prices, as gas would only be diverted when prices
"There is no silver bullet policy solution here," said
analyst Saul Kavonic at energy consultants Wood Mackenzie.
"Intervention like this is going to be opaque and either
ineffective, or pose long term unintended adverse consequences
for energy security or the economy."
The lack of detail around the plan would create confusion,
increase political risk and discourage investment in new supply,
GLNG IN FOCUS
Of the three east coast LNG plants, only Gladstone LNG
(GLNG), operated by Australia's Santos Ltd, is drawing
gas out of the domestic market to help meet its export
Analysts said the plan could expose GLNG to a volatile
global LNG market if the project had to buy cargoes to replace
gas diverted to the domestic market.
"This is a dangerous game to play given the LNG spot market
can tighten quickly with supply outages or weather-driven demand
spikes," RBC analyst Ben Wilson said in a note.
Santos said it was seeking more details on the new policy
but pledged in future to supply more gas into the domestic
market than it purchased for its share of LNG exports.
Its partners in GLNG are France's Total SA,
Malaysia's Petronas and Korea Gas Corp
(KOGAS), while Petronas and KOGAS are the plant's two
KOGAS said it might be affected by any export curbs but had
The two other eastern LNG exporters, Queensland Curtis LNG,
operated by Royal Dutch Shell, and Australia Pacific
LNG, operated by ConocoPhillips, said they were net gas
suppliers to the domestic market.
Manufacturers welcomed Turnbull's move.
The government has armed itself with "a bigger stick" to
ensure the industry balanced the needs of export customers with
its obligation to supply the domestic market at a fair price,
the Energy Users Association of Australia said.
(Reporting by Wayne Cole and Sonali Paul; Editing by Richard