* Australian PM in crisis talks with gas majors
* Australia faces gas shortage despite exports soaring
* Manufacturers desperate for cheaper gas
(Recasts with result of meeting, fresh quotes)
By Sonali Paul
SYDNEY, March 15 Australia's top gas producers,
led by ExxonMobil Corp and Royal Dutch Shell,
agreed to boost supply to the country's domestic market to help
avert an energy shortage following crisis talks with Prime
Minister Malcolm Turnbull.
Australia is on track to become the world's largest exporter
of liquified natural gas (LNG), yet its energy market operator
has warned of a domestic gas crunch from 2019 that could trigger
industry supply cuts and broad power outages.
"We are a massive gas exporter. It is utterly untenable -
unacceptable - for us to be in a position where domestic gas
consumers ... cannot have access to affordable gas," Turnbull
told reporters on Wednesday after the meeting.
He said the producers had guaranteed to ensure that gas
would be available for the national electricity market.
Australia's power supply problems made international
headlines last week when Tesla Inc boss Elon Musk
offered to save South Australia, the country's most
renewable-energy dependent state, from blackouts by installing
large-scale battery storage.
The South Australian government on Tuesday outlined plans to
spend A$510 million ($385 million) to keep the lights on,
including A$150 million to encourage the development of 100
megawatts of battery storage.
Australian manufacturers have long complained of tight gas
supplies and soaring prices as producers have focused on
supplying gas to LNG plants that have locked in 20-year export
contracts. Three LNG plants have opened in the country over the
past two years, which has tripled gas demand and sent gas prices
rocketing from around A$6 a gigajoule (GJ) to as much as $22/GJ.
"That's apocalyptic as far as the cost structures of
energy-intensive manufacturers are concerned," Tennant Reed,
policy adviser at the Australian Industry Group, said at a gas
outlook conference this week.
Companies like top Australian steel maker BlueScope Steel
, fertiliser maker Incitec Pivot and packaging
maker Orora Group have urged the government to reserve
gas for the domestic market or risk losing thousands of jobs as
Both sides of government have resisted a domestic gas
reservation, acknowledging that would create sovereign risk for
existing projects and threaten future investment in the country,
but Turnbull left the door open to imposing a domestic quota.
"We've made considerable progress today, but there is more
work to be done. But the considerable powers the Commonwealth
has are obviously ones that we would never shirk from using in
the national interest," he said.
Shell, which runs the Queensland Curtis LNG plant (QCLNG)
and is sitting on undeveloped coal seam gas in the state, said
it has sold significant volumes into southeastern Australia.
Diverting gas from LNG plants into the domestic market would
be the easiest short-term solution, as two of the three LNG
plants in Queensland - Shell's QCLNG and Origin and
ConocoPhillips' Australia Pacific LNG (APLNG) - have
some capacity that is not locked into export contracts.
Turnbull said both QCLNG and APLNG had committed to being
net suppliers to the domestic market, while Santos' Gladstone
LNG, which is short of gas, had taken the request on notice.
A challenge, however, would be finding space on the gas
pipeline network, said Saul Kavonic, an analyst at Wood
Producers blame state drilling bans, uncertainty over
Australia's climate policy and, more recently, potential
increases in petroleum producer taxes, for deterring development
of new gas fields.
Companies also reined in spending on exploration and
development after the oil price collapse in 2014.
(Additional reporting by Sonali Paul; Editing by Jane Wardell
and Richard Pullin)