Thu Mar 27

Dutton unveils plan to force more gas into Australian market and expand production in major pre-election pitch

Written by Wesley Morgan, Research Associate, Institute for Climate Risk and Response, UNSW Sydney

Opposition Leader Peter Dutton says a Coalition government would introduce a long-awaited gas reservation scheme, in a budget reply speech that puts energy policy firmly at the centre of the upcoming election campaign.

On Thursday night, Dutton pledged a national gas plan that he claimed would “prioritise domestic gas supply, address shortfalls and reduce energy prices for Australians”.

Under the proposed reservation policy, gas companies would be required to divert more gas to the Australian market, rather than sell it overseas. Dutton also pledged measures to speed up development approvals for proposed gas projects.

A gas reservation scheme could help to ease supply concerns in Australia. Labor is expected to announce its own plan to reserve more gas ^[1] for domestic use.

Gas reservation policy may ruffle the feathers of gas importers such as Japan. But it offers a chance to reset relations with our energy-trading partners, and position Australia as a renewable-energy powerhouse.

However, Dutton’s plan to expand gas production is a folly. No new gas projects are needed to meet Australia’s energy needs. The best way to cut energy prices is to accelerate the shift to the cheapest form of energy - which is from wind, solar and storage.

Peter Dutton says a Coalition government would introduce a gas reservation scheme. Mick Tsikas/AAP

Gas reservation: a long time coming

Australia is one of the world’s biggest gas exporters ^[2]. But only a fraction of gas produced here is used to power our homes and businesses. Around 80% is exported ^[3] or is used to liquefy gas so it can be shipped abroad.

This means despite massive production, parts of Australia face potential gas shortages. The Australian Energy Market Operator has warned of a seasonal supply crunch ^[4] in the nation’s south from 2028, as production in Bass Strait declines. Reserving gas for the domestic market instead of exporting it could close these potential gaps ^[5].

The idea of reserving gas for use in Australia is broadly popular. It is supported ^[6] by Australia’s manufacturing industry ^[7], and crossbenchers including David Pocock ^[8] and Jacqui Lambie.

Western Australia has had a gas reservation policy for more than a decade. However, federal policymakers have, to date, not followed suit.

This is likely in part due to opposition from the gas industry, which has traditionally opposed the move ^[9], arguing it would discourage investment ^[10] and create uncertainty.

There have also been concerns the policy could harm Australia’s relations with strategic partners - especially Japan.

The idea of reserving gas for use in Australia is broadly popular. AAP

Spotlight on Japan

Australia supplied 43%^[11] of Japan’s liquefied natural gas (LNG) in 2022. Japan has previously expressed concern ^[12] about federal government moves towards diverting Australia’s gas supplies for domestic use, saying it could threaten long-established trade practices and future Japanese investment.

However, contrary to Japan’s claims ^[13], Australian gas is not needed to keep the lights on. Gas use in Japan is falling ^[14]. Today, Japan on-sells more gas to other nations ^[15] than it imports from Australia.

Importantly, gas contributes to dangerous climate change ^[16] – both when it leaks into the atmosphere as methane, and when it is burned, releasing carbon dioxide and other pollutants.

Around a quarter of Australia’s greenhouse gas emissions come from the production and use of gas ^[17]. Australian gas burned overseas ^[18] is also responsible for substantial carbon emissions in other countries .

Tokyo’s finance for gas projects in Australia ^[19] is slowing the shift away from fossil fuels and diverting investment, workforce, and supply-chain capacity away from clean energy industries.

Diverting Australian gas to meet local needs would help reset trading relations in our region. Australia’s economic prospects are tied to embracing our potential as a clean energy superpower ^[20]. This requires signalling to our trading partners our intention to shift away from gas extraction for export.

Japan does not need Australia’s gas to keep the lights on. Luciano Mortula - LGM/Shutterstock ^[21]

No new gas is needed

In his budget reply, Dutton pledged to audit development-ready gas projects with a focus on the southern states and, as previously announced, fast-track a decision on Western Australia’s Northwest Shelf ^[22] gas project.

A Coalition government, if elected, would also:

invest A$1 billion into a critical gas infrastructure fund
increase gas pipeline and storage capacity
prevent gas companies from prolonged delays in drilling offshore gas fields.

However, Australia does not need any new gas projects. We only use a fraction of what we produce.

What’s more, evidence suggests more gas production will not bring prices down. East coast gas production has doubled over the past decade ^[23] even as gas prices have tripled.

Keeping more gas onshore may help with energy prices. But the best way to reduce power bills is to shift to the cheapest form of electricity generation - which is renewables, not gas ^[24].

The best way to reduce power bills is to shift to renewables. Dan Peled/AAP

Australia’s gas use is declining as we move to cleaner, cheaper and more efficient types of energy for homes and businesses.

On the east coast, gas consumption has declined by 25% in the past decade ^[25]. Just last week the Australian Energy Market Operator found gas demand is falling faster than anticipated ^[26].

Reducing gas use even faster would avoid potential seasonal shortages ^[27].

Gas has a small, short-term role ^[28] as Australia switches to renewables, smoothing out electricity supplies when demand exceeds generation from wind, solar and energy storage.

But the gas won’t be used very often. And a looming surge in batteries ^[29] to store renewable energy is also likely to displace gas generation ^[30] at peak times.

Research suggests production from Australia’s existing projects through to 2035 could meet our remaining gas needs for 60 years ^[31].

A domestic reservation policy could ensure this gas is used to avoid potential supply gaps.

Batteries to store renewable energy are likely to replace gas generation. Mick Tsikas/AAP

Our shared clean energy future

With a national gas reservation scheme on the table no matter who wins the election, Australia will have some tough conversations ahead with international customers – especially Japan.

However both Australia and Japan have committed to cut emissions over the next decade and achieve net-zero emissions in their economies by 2050.

Gas will play an ever-dwindling role in both countries in coming years, as it is replaced by cleaner forms of energy from wind, solar and storage.

Government efforts to manage the energy transition should not encourage new gas projects. Instead, it should position Australia at the forefront of the clean energy revolution.