The robber barons aren’t sparing the horses now.
Origin Energy expects the Albanese government’s domestic gas reservation scheme will initially lead to a glut of gas in the market, raising concern that volumes may not be able to be absorbed by domestic users.
The scheme would mandate 20 per cent of all LNG exports to be supplied to domestic users, but the industry argues Chris Bowen’s plan to “slightly oversupply” the market was likely to freeze spending as investors baulk at government oversight of the sector.
“That amount of volume coming from the other LNG exports probably can’t be absorbed in the domestic market initially, and there’s probably not the level of transport to meet that demand in the country,” Origin’s gas boss, Andrew Thornton, told the Morgan Stanley Australia summit.
The reservation plan only applies to future contracts and spot sales. Existing contracts are grandfathered.
I’ve tabulated all known contracts, spot sales, 20% reservations, and 2p reserves below.
| Year | Exports (PJ) | Contracts (PJ) | Gap (PJ) | Reservation Volume (PJ) | Remaining 2P (PJ) | Bass Strait Supply (PJ) |
|---|---|---|---|---|---|---|
| 2015 | 420 | 700 | -280 | -56 | 38,000 | 680 |
| 2016 | 940 | 950 | -10 | -2 | 37,060 | 650 |
| 2017 | 1,140 | 1,030 | 110 | 22 | 35,920 | 620 |
| 2018 | 1,190 | 1,080 | 110 | 22 | 34,730 | 590 |
| 2019 | 1,200 | 1,110 | 90 | 18 | 33,530 | 560 |
| 2020 | 1,120 | 1,120 | 0 | 0 | 32,410 | 530 |
| 2021 | 1,270 | 1,140 | 130 | 26 | 31,140 | 500 |
| 2022 | 1,177 | 1,150 | 27 | 5 | 29,963 | 470 |
| 2023 | 1,194 | 1,160 | 34 | 7 | 28,769 | 450 |
| 2024 | 1,250 | 1,170 | 80 | 16 | 27,519 | 430 |
| 2025 | 1,233 | 1,170 | 63 | 13 | 26,286 | 410 |
| 2026* | 1,230 | 1,170 | 60 | 12 | 25,056 | 390 |
| 2027* | 1,225 | 1,170 | 55 | 11 | 23,831 | 370 |
| 2028* | 1,220 | 1,165 | 55 | 11 | 22,611 | 350 |
| 2029* | 1,215 | 1,160 | 55 | 11 | 21,396 | 330 |
| 2030* | 1,210 | 1,150 | 260 | 52 | 20,186 | 310 |
| 2031* | 1,120 | 1,150 | 260 | 52 | 19,066 | 290 |
| 2032* | 1,100 | 1,100 | 260 | 52 | 17,966 | 270 |
| 2033* | 1,100 | 1,100 | 260 | 52 | 16,866 | 250 |
| 2034* | 1,100 | 1,100 | 260 | 52 | 15,766 | 230 |
| 2035* | 1,100 | 1,100 | 260 | 52 | 14,666 | 210 |
Basically, a 20% gas reservation would leave us with a tightish market until 2031 because it does cover Bass Strait losses. Then, when the STO Kogas contract rolls off in 2030, the reservation will create a surplus og about 10%.
We should consider doubling the reservation rate to 40% from 2027 to 2030 so we get the price relief earlier by effectively seizing offshore spot sales.
Then drop it to 20% when the contracts start rolling off.
