An aerial shot of the Australia Pacific LNG facility on Curtis Island.
An aerial shot of the Australia Pacific LNG facility on Curtis Island. Photopia

'Don't punish Gladstone': Industry slams idea to ban exports

WARNINGS that Curtis Island LNG plants should make a 'partial' export ban have been slammed by the industry, stating it would have a "negative impact".

The warnings are prompted by the increasing amount of third party gas purchased by Curtis Island LNG ventures, which would otherwise be earmarked for the domestic market. .

According to the Australian Financial Review, a Credit Suisse analysis found the east coast market, largely made up of the $70 billion Gladstone LNG sites, is between 80 and 250 petajoules a year short, starting in 2018.

The bank analysts short-term fix is a temporary restriction on Queensland LNG imports from third parties and exports to Asia.

"If an industrial user can't secure gas from even 2019 onwards, they will have to make a decision on the life of their business long before December 31, 2018," analyst Mark Santer said.

But the feedback was slammed by oil and gas industry group, APPEA, saying it would have a "negative impact" on Gladstone. Queensland APPEA director Rhys Turner said fewer restrictions on gas exploration, creating more gas supply, in other states would be a better solution to rising domestic gas prices.

"Given its status as an export hub, any actions designed to limit gas exports would naturally have a negative impact on Gladstone," he said. "Restricting how and where gas can be sold will only discourage development and deliver less supply."

While Origin's APLNG site is self-efficient, both Santos GLNG and Shell's QCLNG sites buy third party gas.

"(Gladstone) should not be punished just because other states refuse to develop their own gas supply," Mr Turner said.

Leading oil and gas consultancy group Wood Mackenzie has also warned against a ban. Analyst Saul Kavonic said LNG projects in Gladstone should be looking at optimising their gas supply arrangements including the domestic gas market diversions.

"The best solution would be increased and lower cost gas production, but this requires a supportive investment environment, and state drilling moratoriums and any retrospective imposition of adverse regulatory changes does put that at risk," he said.

According to Australian Industry Group gas contract prices have risen to $11-12 a gigajoule by the end of last year, an increase from $6 in 2015.

"The market may well be able to sort this out, although gas buyers will need to adjust to a new structural reality of higher prices than has been received in the past," Mr Kavonic said.

Minister for Northern Australia, Senator Matt Canavan has said building more coal or renewable power stations could ease domestic gas market pressure.

Mr Canavan told The Australian, "We are trying to see if we could free up gas from producing electricity to meeting other needs, where you can't substitute gas".

"It's unfortunate, because everybody expected gas to start taking market share in Australia in terms of electricity generation," he said.



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