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Australia May Limit LNG Exports Amid Domestic Gas Shortage

Australia is again facing a domestic gas shortage because of excessive exports, and the Australian Competition and Consumer Commission is warning that the government must impose limits on LNG exports to secure local supply.

This warning follows a decision by the Australian Energy Market Operator to activate a supply guarantee mechanism that was set up in the wake of another looming shortage a few years ago when the Australian government realized it needed a way to ensure that the local market would be well supplied with gas despite rising LNG exports.

Per the mechanism, the Australian government has the right to divert LNG cargos from three offshore projects in Eastern Australia from the foreign to the domestic market to ensure it is well supplied.

"Australia remains a long-term and reliable supplier of resources and energy, and is a crucial supplier of LNG to our trading partners in north Asia," resources minister Madeleine King said, as quoted by Argus. "We remain committed to contributing to global energy security and working with international partners to address current global challenges."

According to the Australian Competition and Consumer Commission, if LNG producers are allowed to sell all their uncontracted LNG abroad, the east coast of Australia could suffer a shortfall of about a tenth of the forecast gas demand for 2023, the Australian Financial Review reported.

The report noted that demand for natural gas is surging in Australia because of a shift away from coal and not fast enough growth in renewable power generation.

"In the current environment of high international energy prices (including gas and LNG), tight LNG markets, broader supply chain problems, geopolitical instability, inflation and uncertain demand for gas powered generation domestically, we support the Australian government placing greater focus on energy security," the ACCC said in its own report.

By Irina Slav for Oilprice.com

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