Blue-collar workers and manufacturers want the Albanese government to stare down the gas giants as it designs a new gas reservation scheme, warning the industry’s preferred approach would fail to quickly contain prices.
The federal government is expected to unveil plans for an east coast gas reserve as soon as next week after a six-month review of the gas market.
After rubbishing Peter Dutton’s election promise to force gas exporters to divert supplies into the east coast market, Labor is preparing to launch its own intervention to avert potential supply shortages and contain prices for households and businesses.
The government is understood to still be weighing up a potential model as it faces competing demands from gas producers, unions and manufacturers.
The government is also sensitive to concerns from customers in Japan and South Korea, which are heavily reliant on Australian gas exports and have resisted past government interventions that they fear threaten supplies.
The gas industry and the federal Coalition insist the reservation policy must only apply to new gas projects. But unions and large energy users maintain any reservation must capture gas from existing projects, except for those already under contract for export.
Paul Farrow, the national secretary of the Australian Workers’ Union, said a policy that only applied to future projects would “achieve virtually nothing for anyone”.
“To shore up Australian industry for the 21st century, we need affordable gas reserved for domestic use right now – not years down the track,” said Farrow, whose union has campaigned for years for Labor to adopt the policy.
Manufacturing Australia, which represents large energy users including BlueScope Steel and Rheem, has argued an “effective” gas reservation scheme is critical to curtail the high gas prices that risk jobs in the sector.
“To be effective, gas reservation needs to put enough gas into the local market to see prices fall. In the short term, that means immediate reservation of uncontracted gas,” said Ben Eade, the chief executive of Manufacturing Australia.
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“In the medium term, we can grandfather existing export contracts, but reservation should apply to all new contracts, variations or renewals, any gas project expansions or variations and any new gas production from this point onward.”
Two models canvassed
The government has canvassed two models for a gas reservation in private consultation sessions with stakeholders over the past six weeks, two sources familiar with the development of the policy confirmed to Guardian Australia.
The first would create a system in which the three Queensland-based LNG exporters supply a prescribed amount of gas into the domestic market in exchange for export permits. The second option would require all gas producers – exporters and domestic-only producers – to supply a certain volume into the local market, the sources said.
The AWU wants the government to adopt the first option to directly target the exporters, which they say “broke the domestic market in the first place”.
East coast gas prices have tripled over the past decade after the major LNG export terminals linked the domestic market to international demand.
“Australian industry has been bleeding for over a decade while we’ve waited for the gas reservation scheme we desperately need,” Farrow said.
“The priority now is getting a simple, workable model in place urgently – not designing some elaborate credit trading system that the gas companies will find ways to exploit.”
The government would not confirm details of options under consideration when contacted by Guardian Australia.
“The government is conducting a review of the gas market. The government is committed to ensuring Australian homes and businesses get access to Australian gas at fair prices,” a spokesperson said.
A gas reservation scheme already exists for the separate Western Australian market, which requires exporters to supply the equivalent of 15% of LNG production to the local market.
The Labor MP and former industry minister Ed Husic wants his government to pursue even more drastic interventions, including cracking down on importers that on-sell Australian gas to third countries.
“It’s a real barbecue-stopper for many Australians that foreign buyers are on-selling our gas while we’re facing forecasts of local gas shortages,” Husic said.
The Greens are advocating a different approach to prevent domestic gas shortages, backing the Australian Council of Trade Union’s push for a 25% levy on LNG exports.
“Taxing gas will be much more effective way of keeping gas in this country and replacing the Petroleum Resources Rent Tax (PRRT) that’s broken and simply not bringing enough money,” said Steph Hodgins-May, the assistant climate spokesperson for the Greens.