An Australian Senate committee has delivered a report into the government's planned domestic gas reservation (DGR) bill, recommending that the laws be passed to provide certainty for users and producers under the planned domestic supply obligation (DSO), set to begin on 1 January 2028.
The Labor-chaired committee on economics' report, published on 11 November, said the Senate should pass the bill, despite noting concerns about the planned 110pc oversupply of the eastern states' gas market, which multiple LNG terminal operators and utilities said would distort the market and drive away gas investment.
Unions, a major donor group to the governing Labor party, and manufacturing lobbies supported the figure, with steelmaker BlueScope saying the 110pc figure would serve to de-link domestic gas prices from LNG markets.
The bill could provide regulatory certainty for gas producers and energy consumers, the report said, enabling long-term supply contracts to be signed. The report said a DSO would be effective in lowering gas prices and supporting manufacturing investment, stating that Australians have faced high domestic gas prices because of a major increase in LNG exports over the past 20 years.
The Argus Gladstone fob price, an LNG netback indicator calculated by subtracting freight and costs associated with production from the delivered price of LNG to Asia-Pacific, was at A$35.48/GJ ($25.93/mn Btu) on 10 November, up from A$15.40/GJ a year earlier.
Argus' AWX for December domestic gas deliveries to Wallumbilla was A$12.20/GJ on 6 November, and the AVX for December deliveries to Victoria was A$10.167/GJ on the same date.
Dissenting reports
The bill presently before parliament has already passed the house of representatives, where the governing Labor party has a majority. But Labor will likely need to amend the bill in the upper house, the Senate, to secure its passage, meaning it will need to deal with the centre-right Coalition or far-left Greens.
Coalition senators delivered a rebuke to the committee saying that its senators cannot support the legislative package as it currently stands due to the lack of supply incentives, despite backing a DSO.
Western Australia is included "inexplicably" in the DSO despite its existing 15pc reservation scheme, the Coalition said, adding that exploration, new supply and infrastructure barriers should be addressed in the laws.
Meanwhile, the Greens and independent senator David Pocock renewed calls for a 25pc gas export tax to incentivise more gas being sold locally — a policy opposed by the major parties — with Pocock demanding the government release the modelling underpinning the DGR, including that from the Australian Energy Regulator.
Ministerial discretion permitted by the DGR bill opens the scheme to risks of undue influence from lobbyists, Pocock said, with amendments required to ensure transparency in decision-making.
