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News.com.au
21-07-2025
- Business
- News.com.au
What impact will Chris Bowen's gas review have on ASX explorers?
WA's 15% gas reservation policy has kept local prices lower for nearly two decades The federal government now plans to apply a similar model to the east coast What impact will this have on ASX gas players on the east coast? We tap MST Access energy analyst Saul Kavonic to give us a breakdown of possible scenarios Gas reservation – the retention of a percentage of a gas development's reserves for domestic use – has been a feature of Western Australia's energy picture for nearly two decades and the federal government, via Minister for Climate Change and Energy Chris Bowen, is now looking to do the same in the eastern states. The policy has been credited with ensuring comparatively lower gas prices in WA, which had required offshore fields to set aside 15% of their gas for domestic use. While wholesale gas prices in the state have increased significantly since 2020 when the state government allowed onshore fields to export gas, it remains lower than over in the east with Santos (ASX:STO) reporting realised prices of about $8.24 per gigajoule during the first quarter of 2025. This compares with the average gas price of $13.26 per gigajoule on the east coast during the same period, according to the Australian Energy Market Operator (AEMO). Anthony Albanese's Labor government is now hoping that a similar gas reservation scheme could increase domestic gas supplied as it stares at the potential for shortfalls in 2029. Gas policy shake-up For ASX small cap gas players operating on the east coast, implications will vary depending on the details of the reservation policy and how it is executed. Speaking to Stockhead, MST Access energy analyst Saul Kavonic said that if the government simply introduces a forward-looking gas reservation policy for new fields, it's unlikely to shift the dial much for the east coast gas market. But if the government goes down the more aggressive pathway, applying the policy retrospectively to existing projects, Kavonic said it would artificially push more gas into the domestic market for a period of time. 'And that would put some downward pressure on pricing,' he said. 'Even in that scenario, we are still likely looking at double digit gas prices at the very low end, so for the small east coast producers, both the demand and the pricing outlook still appears like it will remain supportive. 'What it will do for those domestic players is drastically limit their market routes by cutting off export of the volumes as an option, and particularly for those players where exports would be the most natural market, that could potentially reduce the availability capital and joint venture approvals for them to proceed.' Another potential benefit for small-cap producers on the east coast is if the policy is structured to incentivise domestic gas development by allowing new gas supply to offset reservation obligations, Kavonic said. 'The policy could open up opportunities for small-cap producers, as LNG players may look to support their projects in order to secure the domestic gas volumes required under the new framework,' he added. 'The risk lies in the government calling it a prospective policy, but then defining it to include new fields, expansions, and third-party supply in a way that effectively makes it retrospective – impacting existing assets and operations. 'I think the government wants to pursue this in a way which encourages more supply, which is in line with the Future Gas Strategy and the statements being made by the Prime Minister,' Kavonic said. 'If they get the settings right, it could see a boost for small independent suppliers as the LNG projects would be incentivised to support and fund them.' But if the government doesn't get the policy right, it could end up doing more harm than good, discouraging new gas supply and making the market situation worse. Testing trade relations Over the past few years, the Australian government's intent to increase supply has tended to backfire. Since 2022 when the Labor government introduced its gas policy, relations with our international trading partners – including Japan – have been impacted. Now, the Albanese government's move to consider an east coast gas reservation is adding even more fuel to the fire, and reportedly causing concern in Japan – a country where securing LNG supply is a national security. WA Premier Roger Cook has flagged serious trade concerns from Japanese stakeholders over the potential east coast gas reservation policy, following meetings with senior government and industry officials during a recent visit. Gas thirst could fuel growth Regardless of what happens in regard to the reservation policy, the hunger for gas supplies could be a benefit for Advent Energy – an unlisted company that's 36% owned by BPH Energy (ASX:BPH). Advent continues to maintain that its PEP 11 permit in the offshore Sydney Basin is in force with respect to matters such as reporting, payment of rents and the various provisions of the Offshore Petroleum and Greenhouse Gas Storage Act 2006 and is currently seeking a judicial review. PEP 11 could host multiple trillion cubic feet of gas, which could go a long way towards meeting east coast gas demand.
ABC News
20-07-2025
- Business
- ABC News
Waitsia gas project delays leave Kerry Stokes-backed firm exporting reserved WA supplies
A gas development backed by media mogul Kerry Stokes has been tapping into Western Australia's domestic gas market to supply overseas customers amid long delays in the delivery of the plant. At the time, the project was supposed to cost $700 million and be operational by late 2023. Mr McGowan said unless Waitsia was exempted from the ban, "the project might not happen" and the gas may have stayed in the ground. But almost two years after that deadline and with a construction bill running at almost double the original estimate, the project is still not ready. In the meantime, the ABC can reveal the project's owners have been taking gas from the domestic market to supply their customers overseas. Waitsia's owners are Beach Energy — the ASX-listed gas producer backed by Seven Group, the conglomerate controlled by Mr Stokes — and Mitsui, a Japanese trading firm. Filings by Beach and public reporting of supplies to and from the Dampier to Bunbury gas pipeline — WA's main energy artery — suggest the partners have sent more than a dozen liquefied natural gas (LNG) cargoes since late 2023. As much as 180 terajoules a day — or roughly 15 per cent of the gas used in the local WA market — has been diverted for export at times during that period, according to the Australian Energy Market Operator's gas bulletin board. In its filings, Beach said the gas has been sourced via so-called swap arrangements, in which the company takes existing supplies from the domestic market on the promise it will return an equivalent amount later when Waitsia is up and running. The gas is processed into LNG at the North West Shelf, a giant plant in the Pilbara where supplies have been dwindling for years. While neither company would comment, Waitsia's backers have pointed out that prices for gas in WA's domestic market have been falling in recent times. From as much as $11.60 a gigajoule in late 2023, according to Perth-based firm Gas Trading Australia, prices on the spot market had fallen to just $6 a gigajoule. On the east coast, by contrast, prices were trading between $10 and $15 a gigajoule. Peter Strachan, a veteran resources analyst, said the fact prices had been falling while Waitsia's partners were exporting domestic gas was nothing more than luck. Mr Strachan said while there was nothing unlawful about what the partners were doing, it raised questions about the integrity of WA's domestic gas market. "It's serendipity," Mr Strachan said. "It might be good business operations, but I think it goes against the whole idea that the gas in Western Australia is for West Australians to consume. "And that's whether it's today or tomorrow or in 10 or 20 years' time." Under WA's laws, the market is supplied courtesy of a 15 per cent reservation policy on offshore fields. It is also supplied by onshore fields. Up until the exemption awarded to Waitsia, onshore projects had exclusively supplied the local market. After years of chopping and changing policy, the WA government last year said it would allow onshore developers to export up to 20 per cent of their reserves but only until 2030. By that time, the Australian Energy Market Operator has forecast that WA will enter a structural deficit of gas, sparking warnings that some users could be pushed to the wall. Mr Strachan said some of the problems that had bedevilled Waitsia were beyond the control of its owners. Chief among them was the collapse of construction company Clough in late 2022. But he queried why Beach and Mitsui were being allowed to take relatively cheap gas from the domestic market to cover their position with buyers overseas. "They had to find some gas from somewhere to meet those obligations they couldn't meet because their project was basically two years delayed," he said. "You would have thought if they were stuck and had to find gas, they could have … bought that gas on the open market from the North West Shelf or from Gorgon or from somewhere in Kuwait. "But they might have made a loss doing that. The DomGas Alliance, which represents some of Australia's biggest gas users such as Wesfarmers, Alcoa and Yara, was equally sceptical. DomGas Alliance spokesman Richard Harris said taking gas from the local market to sell internationally flew in the face of WA's domestic policies. "Domestic gas, when it's in the market in WA, is for WA use, not for export," Mr Harris said. Mr Harris said it was true domestic users were currently enjoying a period of relatively subdued pricing. But he said that reprieve was likely to be temporary. What's more, he said it had been largely caused by the loss of some major gas customers, such as mining giant BHP's Nickel West division and an alumina refinery owned by Alcoa. There had also been, he noted, a short-term bump in extra supplies from Woodside's Pluto project following scrutiny from a state parliamentary inquiry. "All forecasts say that is just a short-term phenomenon," he said. "Within a couple of years, we're going to be heading for a shortfall, and that's certainly what all the forecasts say by 2028, we're in for a significant shortfall of gas." The WA government declined a request to be interviewed about the exports. Instead, it issued a statement in which a spokesperson said Waitsia's export approval also came with a commitment to supply domestic gas. The spokesperson also insisted swap arrangements pursued by Waitsia's partners would have little effect on the domestic gas market. "No further swap arrangements are anticipated once the Waitsia gas plant is operational," they said. "The export of these LNG cargoes does not impact the delivery of Waitsia's domestic gas commitment." Shadow Energy Minister Steve Thomas was not as charitable. Dr Thomas said the export of domestic supplies was clearly never intended by those who designed the state's domestic gas policy. "I don't think the architects of the domestic gas policy ever expected that onshore domestic gas would have to be substituted into the offshore market to meet existing contracts," Dr Thomas said. He argued the government had been so inconsistent in its management of domestic gas policies that they had been turned into a mess. "So the domestic gas policy either stands up or it doesn't," he said. Under the terms of the deal in 2020, the Waitsia partners were allowed until the end of 2028 to export 7.5 million tonnes of LNG. Mr Harris from the DomGas Alliance noted that the project partners were fast running out of time in which to meet their export quotas. Given the lucrative nature of the overseas LNG market, where gas can fetch far higher prices than from domestic buyers, he anticipated a push to extend the export approvals. But he stressed it was something the alliance would oppose. And he warned a failure to do so would risk higher gas prices and "mean the projects that we want to happen like critical minerals won't be able to find gas". "They [Waitsia] were always given a timeline when they had to deliver their bargain to the state, which was to deliver gas into the domestic market in 2029," Mr Harris said. "And that timeline should stick." Peter Strachan agreed but wondered whether Waitsia would still have the reserves to supply the WA market after 2028, noting the project's partners had been progressively writing down their estimates of the gas contained in the field. "Where they thought there would be gas they've drilled and 'oh, there's no gas'," Mr Strachan said. "They're lucky now that they've actually got enough gas to meet their commitments. But where does that leave the local consumer?"
The Guardian
08-07-2025
- Business
- The Guardian
‘Gas belongs to the people': WA premier Roger Cook urges federal Labor to adopt reserve policy
The West Australian Labor premier, Roger Cook, has encouraged his federal counterparts to consider a gas reserve on the east coast as it mulls a regulatory overhaul to shore up supply and contain prices. Cook said WA's gas reservation policy, which requires offshore producers set aside 15% of supplies for local users, has resulted in cheaper gas for households and business since it was introduced in 2006. After criticising Peter Dutton's gas reserve plan during the election campaign, the Albanese government is preparing to consider its own version as part of a six-month review of domestic gas market regulations. The climate change and energy minister, Chris Bowen, has signalled any mechanism would only apply to new projects, a key difference from Dutton's proposal. Sign up for Guardian Australia's breaking news email Cook said the principle underpinning his state's policy was that 'gas belongs to the people of Western Australia' and therefore households and industries should be the 'principal beneficiaries of those reserves'. 'I think it's clear that domestic gas reservation policies do have a positive impact in terms of making gas more affordable for households and industry. That's our experience in WA, so obviously I'd encourage other jurisdictions to consider the same,' he said. Cook cautioned any policy needed to be designed and explained 'in a way that industry understands'. The WA premier made the comments to Guardian Australia while in Japan, where he held talks with government officials and industry leaders about gas and energy transition. Japan is one of the biggest customers of Australia's liquefied natural gas (LNG) exports, importing the fossil fuel to help power its cities. Japanese companies are investors in projects such as Woodside's North West Shelf gas plant in WA and Santos' Barossa venture off the Northern Territory coastline, meaning the country has a direct interest in the expansion of Australia's gas industry. Sign up to Breaking News Australia Get the most important news as it breaks after newsletter promotion Political and industry figures in Japan have repeatedly sounded the alarm about Australian government policies which they warn threaten new supplies, including the safeguard mechanism and gas price cap, underlining how sensitive the Asian nation is to potential disruptions. In the interview, Cook repeated his claim that exporting gas to countries such as Japan was vital to global decarbonisation because it would help displace coal, a supposedly dirtier fossil fuel. Cook said stakeholders in Japan told him the country needed LNG to achieve its target of reducing coal to 19% of its energy mix by 2030, down from 32% in 2019. 'What they're saying to us is that they're committed to the energy transition towards renewables, getting out of fossil fuels, but they can only do that via LNG as part of the overall energy mix,' he said. Bill Hare, a WA-based physicist and climate scientist, said there was 'no scientific basis' to support claims that maintaining gas exports was critical to the clean energy transition. 'People need to be really skeptical about in whose interest these arguments are made, given that the scientific community is saying we need to be phasing out of gas quickly,' said Hare, who is the chief executive of Climate Analytics. 'It's essentially a Woodside argument that he's pushing.' Referencing the ongoing toxic algal bloom in South Australia, floods emergencies in NSW and coral bleaching in WA, Hare said Cook's position on exports was 'not a responsible position'. 'I don't think it's in the interest of Australia,' he said. Hare also noted reports Japan was on-selling Australian LNG gas to other countries in Asia, which he argued was delaying the region's energy transition.
The Guardian
01-07-2025
- Business
- The Guardian
Labor is open to fresh options to secure east coast gas supplies. Is it about to make a radical shift?
A sweeping review of domestic gas market regulation will be conducted over the next six months as the federal government attempts to shore up supplies of a fossil fuel it argues is critical to energy affordability, security and the renewables transition. The government has opened the door to establishing a scheme to reserve east coast gas for domestic use – an idea it criticised when Peter Dutton pursued it at the federal election. As the consumer watchdog issues fresh warnings about looming supply shortfalls, the climate change and energy minister, Chris Bowen, said the federal government would consider 'well-calibrated opportunities to ensure that Australian users get access to Australian gas'. Regulation of the gas market is complicated to say the least. The federal government has three mechanisms designed to ensure sufficient supplies of gas for Australian households, business and industry while allowing gas companies to honour LNG export contracts. The Australian Domestic Gas Security Mechanism – colloquially known as the 'trigger' – is a Malcolm Turnbull-era tool that allows the commonwealth to restrict LNG exports if domestic shortfalls are forecast. Then there's the code of conduct, which the Albanese government introduced in 2023 after Russia's invasion of Ukraine sent global gas prices soaring. The code currently sets a $12-a-gigajoule price cap for domestic sales, while offering exemptions to companies that commit to extra supply. Finally, the government has a 'heads of agreement' with major LNG exporters to safeguard domestic supplies. With reviews into two of those mechanisms due this year, the government has now decided to examine all three at once. And it's leaving open the option of making minor tweaks or wholesale changes. The idea of forcing companies to 'reserve' gas for domestic users, rather than allowing the bulk of it to be sold on the lucrative export market, has long been touted as a straightforward solution to prevent local supply shortfalls. The Australian Competition and Consumer Commission (ACCC) this week warned of a 'deteriorating outlook' for supplies for the east coast in 2025 and 2026, with shortfalls projected from 2028 unless new supply was brought into the market. Groups such as the Australia Institute argue Australia would have more than enough gas if the largely foreign-owned producers weren't exporting the vast majority of it. Western Australia has had a gas reservation since 2006, which requires offshore gas producers to set aside 15% of their gas for the domestic market. Queensland has its own version, which means gas developed through certain tenements can only be sold and used in Australia. But no such regime is in place across the east coast, with the major political parties historically resistant to the market intervention. That changed ahead of this year's federal election with Dutton promising to create an east coast gas reservation if the Coalition was successful. Under Dutton's plan, which the opposition is yet to either dump or re-adopt, a 'gas security charge' would be used to incentivise LNG exporters to keep more supplies onshore. The proposal sparked alarm inside the gas industry, and was ridiculed by experts and dismissed as unnecessary by Labor, which maintained it had already secured substantially more gas through its code of conduct than Dutton's reserve would. But almost two months on from its thumping election win, Labor has signalled it is open to looking at some form of reservation scheme as part of the new review. Sign up for Guardian Australia's breaking news email Asked on Monday if producers should prepare for a gas reserve, Bowen noted that 660 petajoules worth of supply had already been locked in via the code of conduct. 'Now, that's not to say there isn't more to do, and [the resources] minister [Madeleine] King and I will look at sensible, holistic, carefully designed, well-calibrated opportunities to ensure that Australian users get access to Australian gas. I think that's reasonable. That's a reasonable request by the Australian people and one that we will continue to work to deliver,' he said. Bowen all but confirmed any reservation scheme would be limited to new projects, a key difference from Dutton's proposal, which would have captured existing supplies except for those already under contract. 'One thing we won't contemplate is ripping up existing contracts, creating sovereign risk, engaging in behaviours which would see Australia as an unreliable supplier. We won't be doing that,' Bowen said. A consultation paper published on Monday outlined potential options to regulate supply that ranged from 'minimal change' to 'fundamental reform'. The 'fundamental reform' option would involve a new framework that required all LNG exports to be approved subject to conditions, including relating to supply and price. Mark Ogge, a principal adviser to the Australia Institute, said a review was unnecessary when the government already had 'all the tools it needs to ensure Australia has a plentiful supply of gas'. 'The government should not allow any uncontracted gas to be exported unless the Australia market is plentifully supplied with low-cost gas,' he said. 'This is a resource that belongs to Australians.' The federal opposition said the review could not be used to avoid or stall immediate action to bring down prices or avert gas shortages, without offering solutions of its own. The Greens said the review must crack down on profiteering by the gas giants. 'Massive gas corporations are exploiting loopholes to make massive profits off Australia's gas,' the Greens environment spokesperson, Sarah Hanson-Young, said. Australian Energy Producers, the peak body for gas companies, said the review was an 'opportunity to future-proof the east coast gas market and ensure reliable and affordable gas supply for Australian households and manufacturers'. Submissions to the review are open until 15 August. A report will then be handed to Bowen and King to consider the next steps.
News.com.au
30-06-2025
- Business
- News.com.au
Chris Bowen flags greater government intervention in energy markets with Gas Market Review
Labor will consider forcing gas companies to redirect future supplies into the domestic market instead of selling to international markets, with Energy Minister Chris Bowen launching a review into Australia's gas market. The Australian Competition and Consumer Commission warned on Monday Australia's east coast gas supply outlook has further deteriorated, with risks of a shortfall beginning from the fourth quarter of 2025 and into 2026 set to increase if 'Queensland LNG producers export all uncontracted gas'. This is because southern states like NSW, Victoria, South Australia and Tasmania will need to 'continually rely on gas from Queensland as their local reserves deplete,' the ACCC's interim Gas Inquiry report, published on Monday, warned. The ACCC says tipped 'structural shortfalls' on the east coast will continue from 2028 unless new gas supplies are brought online. The government's Gas Market Review will look at how regulations can be improved to ensure affordable and adequate domestic gas supply, with Mr Bowen flagging the importance of gas as a firming power, alongside renewable energy, which will make up 82 per cent of Australia's grid. However, he said existing commercial contracts with international partners will be protected. Australia is one of the world's largest liquid natural gas exporters with export earnings reaching a record $92.8bn in 2023. 'One thing we won't contemplate is ripping up existing contracts, creating sovereign risk, engaging in behaviours which will see Australia (considered) as an unreliable supply. 'We won't be doing that, but what we will be looking at is sensible, forward looking, prospective means to ensure that Australians get access to their gas.' While Mr Bowen wouldn't be drawn on whether this would mean ramping up gas supplies, or creating an East Coast Gas Reserve, he said it was a 'reasonable request' to ensure 'Australian users get access to Australian gas'. The review will also look at consolidating the Australian Domestic Gas Security Mechanism, Gas Market Code and Heads of Agreement with major east coast gas exporters to 'holistically' ensure policy can support the 'efficient supply of gas to industrial users, domestic users, and to the energy system'. Separately, Mr Bowen also commented on Adelaide's bid to host climate conference Cop31 in 2026, with negotiations at a standstill due as Turkey also pitches for the rights. The McMahon MP said while the bidding issue 'has not yet been resolved,' Australia had the support of the Western Europe Group. He also declined to give an estimated cost for the event, but said there would be 'revenue opportunities' through sponsorship and attendance fees. 'This is a remarkable opportunity for Australia. It's the world's largest trades fair,' he said. 'It gives us an opportunity to talk to the world about Australia's capacity to help them decarbonise. 'It's a remarkable opportunity for the Pacific (to) put their issues on the table. If and when we're successful, of course, we'll have more to say about costs.'
