Australia Reviews Policy to Curb LNG Exports

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Supply shortage fears and record natural gas prices have prompted Australia to rethink how and when it might restrict its LNG exports. Canberra recently extended the Australian Domestic Gas Security Mechanism (ADGSM) to 2030 as concerns grow that the country is headed for another power crisis in 2023 due to gas supply deficits. A reform of the mechanism, colloquially known as the “gas trigger,” is also in the works to simplify its usage and make it more relevant to address the challenges faced by Australia’s power system. The ADGSM gives Canberra the power to restrict LNG exports to ensure enough gas is available for domestic use. But the ruling Labor government says the mechanism is poorly designed and takes too long to produce results after it is invoked due to its bureaucratic complexity. It seeks major changes — including the possibility to activate the mechanism at short notice and if domestic gas prices rise beyond a reference price. The reference price could be determined through a legislated calculation, factoring in international prices, production costs, reasonable profit margins for gas suppliers and gas purchasers’ capacity to pay, according to a government consultation paper. Under its current form, the ADGSM can only be activated between July and November if a gas shortfall is forecast to occur the following calendar year. If sufficient gas supply exists but prices rise to unaffordable levels, the gas trigger cannot be pulled. These limitations could be seen during June's crisis, when the loss of some coal-fired power generation, coal supply problems and lower solar energy output prompted a surge in gas demand that resulted in a wholesale gas price spike.

Policy and Regulation, LNG Demand, LNG Forecasts, LNG Supply, LNG Trade, LNG Spot Trade, Gas Supply, Gas Demand, Gas Prices, Gas Spot Markets
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