Expert reveals loopholes in tough new gas ban rules
A RESPECTED resources analyst has identified serious loopholes in the new Federal Government policy that could restrict exports from Curtis Island LNG plants.
Wood Mackenzie's Saul Kavonic says the Australian Domestic Gas Supply Mechanism could fail to influence gas supply and prices - which is sets out to do - because of five "unintended consequences".
The senior analyst's warning is ahead of Deputy Prime Minister Barnaby Joyce's October announcement of whether a gas shortfall will be declared for next year.
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Mr Kavonic said there was little guidance around key elements of the policy - causing uncertainty within the industry, politicians and supply forecasters.
His analysis highlights serious loopholes in the policy, including the possibility that gas exporters could stop producing any gas beyond their contracts.
Claiming the policy could "hurt" Queensland, he said up to 25% of Santos' GLNG's forecast LNG production could be restricted if a gas "shortfall" is declared.
"GLNG has the option of turning down wells, putting gas into storage and drilling less of its marginal wells, keeping at least some of that gas in the ground," he said.
"The spectre of the ADGSM reducing exports, but seeing some of that gas stay in the ground rather than sent to the domestic market, is real."
He said Australia's LNG industry reputation could be "easily lost" and the policy was damaging to long-term contracts.
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"Any gas molecule GLNG does end up diverting to the domestic market will simply be one less gas molecule that Shell or APLNG contract domestically, leaving overall domestic supply unchanged," Mr Kavonic said.
Mr Kavonic said the policy also increased the risk of power outages and gas shortfalls because electricity generators could become "less conservative" in their shortage planning - relying on government intervention instead.