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Australia PM Turnbull says gas companies agree to domestic supply deal
September 27, 2017 / 4:29 AM / in 21 days

Australia PM Turnbull says gas companies agree to domestic supply deal

FILE PHOTO - Prime Minister Malcolm Turnbull reacts during a media conference at Parliament House in Canberra, Australia, August 18, 2017. AAP/Mick Tsikas/via REUTERS

SYDNEY (Reuters) - Australian Prime Minister Malcolm Turnbull said on Wednesday gas companies have agreed to a two-year domestic supply deal to plug a projected shortfall in the country’s east, preventing threatened government intervention in the export market.

The agreement heads off the possibility of Australia forcibly curbing exports from Australia’s three east coast gas exporters - Royal Dutch Shell (RDSa.L), which runs Queensland Curtis LNG (QCLNG), Origin Energy, which runs the Australia Pacific LNG (APLNG) together with ConocoPhillips and Santos (STO.AX), which operates the Gladstone LNG plant.

“They have stated that they will offer first, as a first priority, domestic customers any uncontracted gas in the future as a priority,” Turnbull told reporters in Sydney after meeting with the three companies.

Gas has become a hot political issue as soaring prices are hurting households and threatening jobs at manufacturers like food, building materials and chemical producers, and at the same time driving up electricity prices, as gas-fired power is needed to back up wind and solar energy.

To deal with the crisis the government passed a law earlier this year that would allow it to limit exports from any of the three LNG plants on the east coast to beef up local supply.

Eastern Australia faces a gas shortfall of up to 17 percent of market demand in 2018, the nation’s energy market operator and competition watchdog projected in reports submitted to the government earlier in the week.

The shortfall of around 110 petajoules (PJ) seen in 2018 is far worse than the market operator flagged in March.

Shell, Origin and Santos had already announced plans to step up local supply, but they were deemed insufficient by Australia’s competition watchdog, the Australian Consumer and Competition Commission (ACCC).

“They have also given a commitment to provide regular reporting to the ACCC on sales, offers by them to sell gas and bids to buy gas from customers that they have declined,” Turnbull said.

The deal did not include a guarantee on prices. Turnbull said prices would “vary with the global price.”

Reporting by Tom Westbrook. Editing by Jane Wardell and Richard Pullin

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