Australian report says government’s gas reservation policy is the wrong tool for the job

• EnergyQuest releases eighth annual East Coast Gas Outlook
• Includes first detailed modelling of impact of Domestic Gas Reservation Bill
• Says it is the “wrong tool for the job”
• Examines production in Beetaloo and positive signs for the Taroom Trough

Leading petroleum industry research specialist EnergyQuest has labelled the Australian government’s recently tabled “Domestic Gas Reservation Bill” a sledgehammer action which is the “wrong tool for the job”.

EnergyQuest has released its eighth annual “East Coast Gas Outlook” which includes the first detailed modelling of the impact of the Domestic Gas Reservation Bill which was tabled by the government on 14 October.

The oil and gas industry research firm reported in last year’s East Coast Gas Outlook that the industry was somewhat battered and bruised without a clear path forward, and at best just ‘muddling through’.

“We are still muddling through, but this year the focus has shifted unequivocally to energy security. To address this, the Australian government has tabled a Domestic Gas Reservation Bill – a sledgehammer action which we conclude is the wrong tool for the job,” EnergyQuest stated.

“EnergyQuest does not have any commercial or political agendas to push. We are energy analysts not advocates. Nor does the report make any heroic assumptions about how the current energy system might be or should be transformed. Rather the report projects future gas demand and supply given demand trends and the current resource base.”

The latest outlook found it is clear that the legacy fields in Gippsland, as well as the Otway and Cooper Basins, continue to decline and northern gas is becoming more important.

It also the considers emerging options for more gas supply.

“Production in the Beetaloo, new positive signs for the Taroom Trough and an exploration drilling campaign in the Otway Basin are positive signs.”

The report also examines falling domestic demand, and the contribution of each market segment to that fall and includes a look at the impact of coal-fired power generation closures and the timing is considered in the gas profiles.

Last week the Australia’s petroleum industry hit out at the release of the proposed domestic reservation scheme – describing it as just a short-term price hit.

Lobby group Australian Energy Producers (AEP) said the government has missed an opportunity to address fundamental flaws in its proposed domestic gas reservation scheme, with legislation introduced today retaining key provisions that risk undermining investment, competition and Australia’s long-term energy security.

Under the proposed reservation requirement, LNG exporters must supply gas to the domestic market equivalent to 20% of their annual export volumes.

AEP, chief executive, Samantha McCulloch, said despite repeated warnings from industry, the legislation continues to pursue an artificial oversupply of the east coast gas market that will weaken investment signals and crowd out smaller, domestic-focused producers.

Ms McCulloch said the proposed “must sell” requirement compounds these risks by potentially forcing producers to sell gas below cost or on non-commercial terms.

“This is another short-term price intervention rather than a sustainable policy to encourage investment in new gas supply and deliver long-term certainty for gas producers and users,” Ms McCulloch said.

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