Energy security, moratoria and domestic gas: Australia, LNG and its gas policy catch-22

Abstract

In a region undergoing rapid and profound geopolitical change, energy security will be more important than ever. As a key regional energy producer, Australia will play a fundamental role in the energy security of its major trading partners. However, ironically, it also faces energy security challenges of its own. Over the next 12months, as Australia becomes the world’s largest producer of liquefied natural gas (LNG), its own domestic gas demand will also continue to grow. At the same time, one or more of our LNG facilities is expected to start to face significant upstream gas supply constraints. All of them will experience greater global competition. Yet, ever increasing pressure continues to be exerted on Australia’s governments to restrict, curb or even completely stop further exploration and development of hydrocarbons around the country. In New South Wales, Victoria and the Northern Territory that pressure has effectively ended new gas exploration and development for the foreseeable future. Elsewhere, it has resulted in increased regulation and uncertainty. There is a natural tension between Australia’s domestic energy security, its economic and national security interests in remaining at the heart of regional energy security, and important environmental objectives. However, these concepts and priorities do not need to be mutually exclusive, but can be achieved in balance with the right policy settings. This paper will discuss the political impasse we have reached, and the main policy options available to thread the needle between securing an economic domestic supply of gas and allowing our gas explorers, producers and exporters to continue to grow. It will seek to provide a practical analysis against the backdrop of the rapidly changing regional economic and political environment, as well as seeking to inform and stimulate the broader debate.