Australian Energy Producers claim that the gas review fails to meet supply goals

Australian Energy Producers' (AEP) Chairman Cecile Wake said on Tuesday that government's review of the gas market falls short of its goal to increase supply.

Wake said, "We must not make a false choice" between a well-supplied gas?market at home and a strong industry (liquified natural?gas).

This month, following the review first announced in December and a requirement that energy exporters reserve 20% of their gas for Australia’s domestic east coast markets, a final decision was made.

Wake is also the Country Chair of Shell Australia. Shell Australia is one of the three LNG exporters in Queensland who will be affected by the new reservation policy.

Several members of the industry have complained that details are still unclear, such as whether markets not physically connected with the east coast gas market are included in the reservation scheme. Western Australia has its 15% domestic gas reserve policy.

The government announced that the scheme would be implemented from July of next year and will not affect any existing contracts. The government also ruled out the possibility of a 25% windfall tax on gas exports.

According to the Australian Energy Market Operator, the east coast could run out of gas before the end of this decade.

Wake, speaking on a panel of producers, said that all agreed that the policy could lead a surplus that would drive down prices and discourage investment in new exploration and development.

She said: "It'll really reduce the confidence that regional trading partners have in Australia when it claims to be a reliable, secure partner for those countries in the area."

After the closure of the Strait of Hormuz, Australia announced a series of deals with its biggest LNG import partners to secure supplies of refined products and oil crude to Australia.

Santos CEO Kevin Gallagher, who runs the Gladstone LNG Project in Queensland, and is one of only three exporters that sources?third party gas, warned that lower prices would "kill" companies.

He said that it is important to think about this "very, very carefully".

Anthony Chisholm, Assistant Minister of Resources said that the Labor Party is "committed" to consultation.

(source: Reuters)