Australia relaxes the east coast gas reservations rule for LNG exporters and delays start in 2028

Australia relaxed slightly on Thursday a proposed rule that would have "forced" energy exporters to set aside a fixed amount of natural gas (?20%) for its East Coast market. Instead, they were required to reserve as much as a fifth.

The Energy Minister Chris Bowen stated that exporters can provide up to an additional 200 petajoules per year. This is more than enough for the energy market operator to be able to meet the potential shortfalls up to 140 petajoules.

Bowen, in a statement, said that the?proposed policies will make "gas more affordable" and ensure that there is a modest oversupply on the domestic market.

He said: "The scheme will ensure domestic customers have access to a wider pool of gas. This will reduce the risk of tight markets driving up prices, promote long-term contracts and protect them from global volatility."

Four months ago, the Labour government of the centre-left proposed a?hard 20% gas reservation scheme on the east coast market. The government proposed in?December a plan to reserve between 15 and 25 percent of gas.

The reservation scheme will affect three LNG export projects operated by Origin Energy and Shell on the East Coast, but existing contracts are exempt.

Early morning trading saw shares of Santos, the company that operates Gladstone LNG in Queensland, and Origin Energy (which leads Australia Pacific LNG), a rival export consortium, slightly higher.

Australia is the largest LNG exporter in the world and it ships more gas abroad than it consumes at home. Most of Australia's gas reserves are located in the northwest, away from the southeast where the demand is concentrated.

The state of Western Australia has already implemented its own reservation system that requires offshore gas export projects to divert 15 percent of their output to the local markets.

Bowen said that the start date of the scheme would be delayed by six months "to align with contracting cycles in industry", meaning LNG exporters wouldn't have to meet their commitments for supply until January 1, 2028.

The government released on Thursday a draft policy, asking for feedback by September 24. This follows the receipt of'more than 140 submissions received from gas producers, exporters, retailers and large industrial users during the preliminary planning phase.

The bill will be introduced into parliament in the second half of this year.

(source: Reuters)