The Asia-Pacific gas market has suffered another blow after major natural gas producer Australia signaled it could potentially cut down liquified natural gas exports as the region battles tight gas supplies, high prices and competition from gas-short European buyers.
Australia is looking to trim its overseas sales in favor of domestic consumption ahead of a projected shortfall in local supplies next year
As energy protectionism takes hold globally, last week, the Australian Competition and Consumer Commission called on Canberra to protect domestic gas supplies and curb LNG — cooled natural gas — exports after projecting the east coast of the country could face a shortfall of 56 petajoules of gas next year.
For months, Asia-Pacific region has faced competition for fuel from European buyers looking to replace restricted Russian gas.
These European countries, in scrambling for LNG to mitigate a shortage of pipeline gas ahead of the northern winter, have outbidded some less developed Asian countries.
“To protect energy security on the east coast we are recommending the Resources Minister initiate the first step of the Australian Domestic Gas Security Mechanism (ADGSM),” ACCC Chair Gina Cass-Gottlieb said last week.
“We are also strongly encouraging LNG exporters to immediately increase their supply into the [local] market.”
A liquefied natural gas tanker berth in Japan, on Dec. 17, 2021. Should Japan ever exit the Sakhalin energy projects in Russia and their stakes were acquired by Russia or a third country, this would weaken the effectiveness of Western sanctions and benefit Russia, Japan’s industry minister said on Friday.
Kiyoshi Ota | Bloomberg | Getty Images
Most of the gas used on Australia’s east coast is produced by companies that are also LNG exporters to Asia-Pacific and other countries. The ADGSM stops these producers from exporting LNG if there is a shortfall domestically.
While most LNG sales to overseas buyers are made through long-term contracts, Australian LNG producers also sell ad-hoc and non-contracted LNG on the spot market. Countries without the ability to strike competitive long-term contracts are forced to buy them on the spot market.
It is this LNG supply that the ACCC says producers should avoid selling to the overseas market — currently flushed with gas-starved buyers — and save it for local consumers.
Gas lobby group the Australian Petroleum Production & Exploration Association however has assuaged markets, saying despite the ACCC warning, there is more than enough gas next year and that there has never been an actual shortfall previously.
“It’s certainly been the case throughout the existence of the export industry, that there has been a surplus of gas into the domestic market. So we have been able to achieve both. We don’t go for the idea that it is one or the other,” acting chief executive Damian Dwyer told CNBC’s “Squawk Box Asia” on Tuesday.
“There’s been significant investment into the export industry. And that…
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