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Australia's Santos steps up effort to avert LNG export curb
August 30, 2017 / 2:44 AM / 21 days ago

Australia's Santos steps up effort to avert LNG export curb

* Santos arranges gas swap to boost local supply

* Santos lining up 30 PJ of extra supply for local market

* Market operator to send gas forecast to Canberra on Sept 1

* Petroleum industry expects no gas shortfall in 2018

By Sonali Paul

MELBOURNE, Aug 30 (Reuters) - Santos Ltd is racing to boost gas supply to Australia’s eastern market to fend off government limits on exports of liquefied natural gas (LNG) in 2018, with its latest deal involving local gas swaps.

Australia is on track to become the world’s biggest LNG exporter by 2019, which has tripled demand for gas on Australia’s east coast, straining supplies in the domestic market and driving up gas and power prices.

To help ease soaring energy prices, the government has put in place a controversial measure to curb LNG exports from the east coast if it deems there is likely to be a shortfall of domestic gas supply in any year.

The Australian Energy Market Operator (AEMO) is due to deliver its latest forecast on gas adequacy to the federal government on Friday.

That report will be the basis for the government to decide whether to declare a gas shortfall for 2018 and trigger export curbs.

“APPEA believes that, to date, no credible evidence has been presented to suggest that there will be a shortfall of domestic gas supply in 2018,” Australian Petroleum Production and Exploration Association Chief Executive Malcolm Roberts said in emailed comments to Reuters.

Santos’ Gladstone LNG plant is the most vulnerable to the export restrictions as the rules target any east coast LNG project that is taking gas from the domestic market to help meet its export contracts.

To boost local supply, Santos on Wednesday announced a deal involving a gas swap that could send an extra 18 petajoules to the southeastern states. Santos declined to identify which company it was working with.

The deal allows the undisclosed company to deliver gas without having to enter separate pipeline transport agreements. Access to pipeline capacity has been seen as a key obstacle to moving gas from north to south.

Santos also earlier announced a deal to supply 15 PJ of gas to a power plant in South Australia from January next year.

“We expect to announce further domestic supply contracts of approximately 30 petajoules, and we are also in discussions to utilize our transport capacity positions to enable more gas to flow to the southern markets,” Santos said in emailed comments to Reuters.

Gas producers have warned that the export curbs raise sovereign risk in Australia and could backfire.

“Cancelling export contracts threatens to undermine investment in new supply. This would exacerbate supply concerns,” Roberts said.

Reporting by Sonali Paul; Editing by Richard Pullin

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