The country’s biggest gas companies have agreed to “put Australians first” and boost domestic supply next year to help avoid a potential energy crisis.
But the prime minister warns that residents in Victoria and NSW will keep paying more for their power if their states don’t free up their own gas resources.
Santos, Origin Energy and Shell on Wednesday committed to offering enough gas to the local market to cover an expected shortfall in 2018, following a meeting with Malcolm Turnbull and senior ministers in Sydney.
They will meet again next week to nut out the details of the agreement and an intended similar guarantee for 2019.
It means the federal government won’t have to follow through on its threat to restrict exports, although it remains an option.
“They have stated that they will offer, as a first priority, domestic customers any uncontracted gas in the future,” Mr Turnbull told reporters.
He says if the deal is honoured and there is not a shortfall of gas then there won’t be a need for export controls – something that he doesn’t “relish”.
“We want to see more exports, but Australians have to come first,” Mr Turnbull said.
Two reports this week warned of a shortage of gas in 2018 of up to 107 petajoules – about three times larger than previously forecast.
Despite the deal, Mr Turnbull continued his push for Victoria and NSW to unlock their onshore gas resources.
Queensland produces most of the gas for the east coast, meaning those in the southern states have to bear the extra cost of transport.
“The failure of Victoria and NSW to get their onshore gas resources developed means residents of NSW and Victoria and businesses in those states are going to continue to pay more for gas than they otherwise would,” he said.
It accounts for about 11 per cent of the gas bill for a typical Melbourne household, and about five per cent for the average Sydney household.
Energy Minister Josh Frydenberg said the commitment from the gas companies didn’t mean states and territories were off the hook.
“The clear preference is to get gas produced in the areas in which it is needed for the families and for the businesses in those states,” he said.
The companies have also agreed to report regularly to the competition and consumer watchdog on sales, offers to sell, and bids they’ve declined to buy gas.
The prime minister labelled that an important step that will shine a light “on what has been a very opaque industry”.
“That sunlight will ensure more gas at better prices for Australians,” he said.
Labor’s energy spokesman Mark Butler said the agreement was not enough, arguing that similar assurances have been given in the past but not delivered.
The agreement only covered the minimum supply shortage and a legal guarantee was needed, he said.
“It appears that Malcolm Turnbull thinks that the way you get results is, instead of speaking softly and carrying a big stick, you talk a lot and you throw away the stick,” Mr Butler told reporters in Adelaide.
He said the only way to cover the shortage was to restrict gas exports.
The Australian Industry Group and Australian Chamber of Commerce and Industry welcomed the announcement, but noted the need for a long-term solution.