{"id":680655,"date":"2026-05-19T11:15:20","date_gmt":"2026-05-19T11:15:20","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/680655\/"},"modified":"2026-05-19T11:15:20","modified_gmt":"2026-05-19T11:15:20","slug":"energy-crisis-gas-giant-warns-labor-about-risk-of-argentina-style-industry-collapse-2","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/680655\/","title":{"rendered":"Energy crisis: Gas giant warns Labor about risk of \u2018Argentina-style\u2019 industry collapse"},"content":{"rendered":"

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One of Australia\u2019s largest gas producers warns the Albanese government risks replicating failures that led to the decline of the industry in Argentina if it curbs gas exports too aggressively and kills off investment in future domestic sources of supply.<\/p>\n

Unprecedented gas reservation rules in eastern Australia are due to kick in from July next year, which will compel exporters of liquefied natural gas (LNG) to hold back the equivalent of up to 20 per cent of what they send overseas each year and ensure they deliver it locally.<\/p>\n

\"MostMost of the gas produced on the east coast is converted into liquefied natural gas and exported. The federal government is developing a scheme to force producers to reserve some for the domestic market.Getty Images<\/p>\n

The move comes amid growing concerns that too much LNG is being shipped offshore from Queensland at the expense of local buyers, exacerbating a supply crunch and pushing up prices. Despite Australia\u2019s position as one of the world\u2019s biggest LNG exporters, officials warn that Victoria, New South Wales and South Australia face a domestic shortfall hitting before 2030, as the decades-old production fields of the Bass Strait continue to deplete rapidly; there are not enough new supplies to replace them.<\/p>\n

Left unchecked, the shortfall could worsen cost-of-living stresses for consumers who still use gas for cooking and heating, add to the price of electricity, and threaten the viability of factories that use gas for heat or as a feedstock.<\/p>\n

However, chief executives of major Australian gas exporters Santos, Shell and Woodside Energy on Tuesday sounded the alarm over unresolved aspects of how the government\u2019s new reservation scheme would work. If it forced an excessive oversupply of local gas, they said, the policy would slash prices temporarily but undermine investment in new local drilling projects needed to keep supplies and prices stable into the future. It could also jeopardise crucial trade ties with Australia\u2019s major LNG customers in Asia.<\/p>\n

\"SantosSantos chief executive Kevin Gallagher said a poorly-designed gas reservation scheme could kill new investment.Roy VanDerVegt<\/p>\n

Kevin Gallagher, managing director of Adelaide-based Santos, said the scheme, if not designed carefully, would \u201ckill investment in new supply\u201d. \u201cThe minute that catches up, you will see shortages,\u201d he told the Australian Energy Producers conference. \u201cAnd you will see prices skyrocket.\u201d<\/p>\n

Because only so much gas can be piped south from Queensland, Gallagher said deterring investment in new local gas fields in south-eastern Australia to replace falling Bass Strait production would force Victoria and NSW to establish floating gas-import terminals to receive cargoes from other parts of the country or overseas at potentially higher prices. Gallagher underlined the risk of heavy-handed interventions by pointing to Argentina\u2019s gas export tax and price controls in the early 2000s, which crippled its local export industry and turned the country from a net exporter to a net importer of gas.<\/p>\n

\u201cIf you want to watch how to kill an industry, go and do a case study of Argentina \u2013 they killed a gas export industry by very similar types of intervention and policies,\u201d Gallagher said.<\/p>\n

Australia is the third-largest global supplier of LNG \u2013 gas that has been super-cooled down to a liquid so it can be shipped across the world. Western Australia has its own gas reservation policy, requiring the LNG industry to hold back 15 per cent of its reserves, but there were never such rules imposed on Queensland exporters when the state\u2019s three LNG terminals \u2013 operated by Shell, Origin Energy and Santos \u2013 were launched a decade ago.<\/p>\n

Related Article\"Chief<\/a><\/p>\n

There are specific questions about how the new scheme will affect Santos. Unlike the Shell and Origin-backed projects, which already supply large gas volumes to the domestic market as well as Asian buyers, the Santos-led Gladstone LNG venture does not have surplus uncontracted supplies to deliver locally. If the rules are not limited only to uncontracted supplies, the company may need to invest in developing new supplies or strike deals to underwrite new third-party production projects.<\/p>\n

Shell Australia chair Cecile Wake said the government had an opportunity to create a \u201cholistic and enduring policy\u201d that would \u201crestore certainty and unlock investment\u201d in new supplies and infrastructure. However, a \u201cpoorly designed or poorly calibrated\u201d scheme that forced an oversupply would worsen the threat of future supply shortfalls, she said.<\/p>\n

\u201cOur industry stands ready to work with the government and all stakeholders to ensure that, together, we achieve that outcome,\u201d she said. \u201cBut it must begin with setting the conditions for growing supply, not redistributing an ever-diminishing pie.\u201d<\/p>\n

Energy Minister Chris Bowen said the gas reservation would help shield the local market from global shocks and create a \u201cmodest oversupply\u201d that would put downward pressure on domestic energy prices.<\/p>\n

Further details about the scheme\u2019s design are expected to be revealed at meetings between industry and government leaders next week.<\/p>\n

Related Article\"Victorian<\/a><\/p>\n

Despite facing pushback from the industry, Labor\u2019s scheme has won the backing of major manufacturers, which need gas to fire their kilns and furnaces, and as a feedstock for making products like plastics, chemicals and fertiliser. Industry representatives said Labor\u2019s reservation plan marked the most significant reform to the gas market in more than a generation, and would help keep factories viable.<\/p>\n

The prospect of a domestic gas shortage underscores a deepening challenge for governments that are having to balance goals to combat climate change with the need to shore up polluting fossil fuels for those who still depend on them.<\/p>\n

Households are increasingly switching from gas stoves and heaters to electric alternatives, aided by government incentives and policies banning gas hook-ups in new residences. However, that shift is not happening fast enough to avert the need to boost gas supplies, the energy market operator says.<\/p>\n

The Market Recap newsletter is a wrap of the day\u2019s trading. Get it each weekday afternoon<\/a>.<\/p>\n

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\"NickNick Toscano<\/a> is a business reporter for The Age and Sydney Morning Herald.Connect via X<\/a> or email<\/a>.From our partners<\/p>\n","protected":false},"excerpt":{"rendered":"Save You have reached your maximum number of saved items. Remove items from your saved list to add…\n","protected":false},"author":2,"featured_media":331872,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164],"class_list":["post-680655","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/680655","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=680655"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/680655\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/331872"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=680655"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=680655"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=680655"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}