ACCC Changes Its Mind on a Gas Reservation Policy

In a surprise announcement on Friday the ACCC Chair Rod Simms backflipped on his previous stance and “joined the chorus for a gas reservation policy on the east coast to keep a lid on prices and save key manufacturers from closure”.  ABC News published an in-depth article about the announcement containing some great analysis as well as a video segment that is worth watching.

We’ve received many questions asking why a gas reservation policy is a good thing.   In short, here’s why:

  • First, Australia is one of the world’s biggest gas exporters (#2 in fact).
  • Victoria is no exception.  Only half the gas produced in Victoria’s Bass Strait is used in Victoria. The rest is exported.
  • AGL is planning to re-import gas to Victoria, most likely Australian gas which has already been sold to Asia for a cheap price because they believe Victorians will pay higher prices than it will cost them to re-import it.

Having a gas reservation policy eliminates such convoluted commercial shenanigans where our own gas is sold back to us.   Instead, having an energy policy which holds gas in reserve for domestic use keeps our own gas here, for our own use, and keeps prices lower naturally.     If you’re interested in more detail about how we got into this strange situation, Julia Stockigt has written an excellent background article worth reading.

Most gas exporting countries already have have a ‘Gas Reservation Policy’, which means that a designated proportion of the gas they produce must remain in the country for domestic consumption. For example, Indonesia reserves 60% of its gas for local consumption, WA reserves 15%. 

Right now, there is no gas reservation requirement for Australian east coast gas producers.  They can export as much as they like!