Australia’s competition regulator said the possible sale of natural gas to international customers as liquefied natural gas originally intended for Australia’s domestic market, must be reviewed due to high wholesale prices at home.
Ahead of a scheduled meeting between Prime Minister Malcolm Turnbull and energy producers over Australia’s potential gas shortages, the regulator said the ability of the Santos Ltd.-led Gladstone LNG (GLNG) project to export third-party gas must be examined.
The $18.5 billion project will buy more than 20% of gas available for users on the country’s east coast this year due to shortages from its own fields, according to consultancy Wood Mackenzie.
GLNG “was clearly short of gas and has had to buy it from the domestic market to meet its overseas contracts,” Rod Sims, chairman of the Australian Competition & Consumer Commission, told Bloomberg.
The purchases by Santos, along with state bans on drilling, “has created a crisis for Australian manufacturing, which does need to be addressed.”
The supply squeeze has contributed to the spot price of wholesale gas in Australia tripling in the last two years, according to a February report from the Australian Industry Group, and led to calls to restrict exports to Asia, Kallanish Energy finds.
“It is not acceptable for Australia to be shortly the world’s largest exporter of LNG and yet to have a gas shortage on the east coast in its domestic market,” Turnbull said at a briefing Tuesday. “We will defend the energy security of Australians and reliable and affordable gas supply is a key part of that.”
Santos didn’t answer questions from Bloomberg and referred to an interview CEO Kevin Gallagher gave to Sky News Tuesday. The CEO said the Australia-based company would be happy to send gas to local markets it can free up, but has little supply available because of state restrictions on exploration.
Australian Energy Minister Josh Frydenberg said in an interview with ABC Radio Wednesday domestic purchases of gas by Santos that are then exported have boosted prices across the country. The minister said he would have a frank conversation with Santos during their meeting and say the situation occurring with gas supplies is “unacceptable.”