Review of domestic gas pilot program
In February 2017, the Queensland Government released for the first time land for gas development with the Australian market supply condition. Any gas produced on a tenure with the Australian market supply condition must be supplied and used in Australia to help meet domestic gas demand. To date, this condition has since been imposed on 11 areas released in Queensland.
DNRME is conducting a review of the Australian market supply condition. Terms of reference for this review have been developed and are outlined below.
Terms of reference
The Department of Natural Resources, Mines and Energy requires an evaluation of the Australian market supply pilot program for gas resources, to investigate and report on:
- the extent to which the domestic supply condition is meeting the government’s objectives
- any modifications or alternative policy options that might deliver a better result.
- Queensland released land for gas development with an Australian market supply condition for the first time in February 2017, as market analysts were projecting an undersupply of gas from 2019 to 2021. Under the condition, the gas produced must be supplied and used in Australia.
- The legislative framework for the Australian market supply condition is set out largely in Chapter 2, Part 2A, of the Petroleum and Gas (Production and Safety) Act 2004.
- Since 2017, the Queensland Government has released 11 areas with an Australian market supply condition, totalling more than 8500 square kilometres of land.
- Recently, the Queensland Government enhanced its Australian market supply condition program by including a requirement that any gas produced must be supplied to an Australian manufacturer that will use the gas within Australia in a recent call for tenders.
The report must provide:
- commentary on the extent to which land releases to date with Queensland’s Australian market supply condition have or are predicted to ameliorate domestic gas supply issues
- any specific impediments to the optimal operation of the legislation
- recommendations on possible adjustments to the Australian market supply condition legislation or its implementation to improve its effectiveness and/or efficiency, including:
- how/whether gas can be sold into the spot market (either at a hub or the Short Term Trading Market (STTM))
- consider barriers to achieving the objective(s) that could be addressed easily (e.g. whether domestic gas can be delivered by a swap arrangement, which may include swapping with an LNG supplier)
- recommendations for consideration on alternative or additional policies that would address domestic gas supply issues.
Out of scope
Queensland royalty arrangements for petroleum and gas tenure.
The evaluation must include interviews with companies, namely:
- two bidders from each land release
- major gas producers
- gas users/manufacturers
Investigation of other jurisdictions’ approach to domestic gas supply, and the status of the East Coast Gas Market as outlined in such reports as AEMO’s Gas Statement of Opportunities (GSOO) report, Australian Competition and Consumer Commission’s (ACCC) Gas inquiry (2017-2020 Interim report).
Interviews/sourcing material from DNRME staff
The department will provide the following materials:
- a contextual description of the East Coast Gas Market including forecast supply and demand, the major suppliers and users, and a discussion of gas processing and transmission infrastructure
- a statement of pilot program facts: areas, tender winners, status of tenure exploration or production, estimate where feasible of volume of gas available
- a summary of gas supply initiatives underway in Queensland and those being implemented through national programs - for example, through the COAG Energy Council.
A final report is due to be released in the first quarter of 2020.
Last updated 14 January 2020