Q: Can Australia dictate the levels of gas reservation from the current gas fields under the current extraction contracts with the companies extracting and exporting Australian gas? Gezza.

Thanks for your question Gezza. The good news (and easy answer) is – they don’t have to!

This report is from August 2024, but the principle is the same.

Australia has an abundance of uncontracted LNG capacity over the next 20 years – so much that just 5% of the uncontracted gas could be used to meet any potential ‘shortage’ that usually comes up everytime we talk about domestic capacity.

As Matt Saunders explained:

In a March 2023 Senate committee hearing on the Cost of Living, the Chief Executive Officer of the leading gas lobby group, the Australian Petroleum Production and Exploration Association (now renamed Australian Energy Producers), Samantha McCulloch, told senators that “that gas was produced in large part because of plans to access the export market. Essentially, it wouldn’t have been produced without that export market there. When those facilities were built, they had long-term supply agreements with our trading partners in Japan, Korea and elsewhere, so there is a very strong export market.”

And so the gas industry argues that Australia has a gas shortage, and that gas converted to LNG can’t be used to meet any “shortage” because of the long-term supply agreements in place. However, analysis of the government’s Future Gas Strategy and AEMO reports shows this line is just an excuse because the uncontracted capacity of LNG well exceeds that of any supposed shortage.

From these reports we know the amount of gas currently contracted for exports, this enables us to calculate the level of uncontracted gas relative to current export outputs. This analysis reveals that by the middle of the next decade, when the annual gas shortage in South East Australia is predicted to be equivalent to 3MT of LNG, Australia will have around 53MT of LNG export capacity that currently has no export contracts.

That means a mere 5% of that uncontracted gas could be used to meet any potential “shortage”. The reason gas companies have not agreed to do so is because they hope to make greater profits selling the gas overseas.

So we don’t even have to alter contracts to create a domestic gas reserve. We have enough just sitting there waiting for an export contract.

But either way, we don’t need new gas fields to meet our domestic needs.