Gas companies Woodside and Esso will supply extra gas to the east coast energy market in return for receiving higher wholesale prices, the federal government has announced.
Key points:
- Woodside and Esso will provide 260 petajoules to the domestic gas market in exchange for an exemption to the price cap
- The change will see more gas available for power generators and large businesses, but the consumer effect is likely to be small
- The supply agreements are the second tranche announced under the government's Gas Market Code
The supply deals were made under the government's Gas Market Code, which began operation last year.
That code set a price cap of $12 per gigajoule, but allowed gas suppliers to go above the cap, subject to ministerial approval, if they promised to prioritise the domestic wholesale market.
The wholesale market is where gas power generators and large businesses purchase gas. Any effect on gas or electricity bills for households would be indirect and is difficult to assess.
Energy Minister Chris Bowen and Resources Minister Madeleine King said the agreements would see over 260 petajoules of gas made available between now and 2033, enough to power all east-coast gas power stations for two and a half years.
"We introduced the gas code of conduct to anchor prices and ensure that international instability did not flow through to domestic gas users," Mr Bowen said.
"We then introduction our regime of exemptions … to deal with predicted shortfalls and shortages."
He said the agreements would provide "stability" to the market.
Last November, the ministers approved separate applications by Senex and APLNG, worth another 304 petajoules. Further applications are being assessed.
Code wars
The Gas Market Code, which was legislated in late 2022 and enacted in 2023, mandated transparency standards, conduct requirements and a price cap for gas producers.
After negotiating with the industry, the government agreed to add exemptions to the cap. Small producers who solely supply the domestic market were given a blanket exemption, and large producers were able to apply.
The Coalition did not support the code, arguing it was a heavy-handed intervention.
Shadow Energy Minister Ted O'Brien said the exemptions were an admission of failure by the government. "It shows Labor's policy is in tatters," Mr O'Brien said. "The only way it can have gas flowing again is to exempt companies from its policies."
The Greens have criticised the exemptions regime, saying it is too lenient on gas producers.
James Ha, research lead at Aurora Energy Research, said the exemptions "might help to alleviate supply shortfalls," but were unlikely to do much for households.
"Two things matter. One is the price the gas is made available at, and if that is well above $12 that is not likely to be helpful for consumer prices," Mr Ha said.
"The other issue is location. We've got quite a limited ability to transport gas from area to area when it's most needed, so extra gas produced in one east coast state may have limited effect on the others."