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Major LNG exporter Australia plans to extend the cap on domestic natural gas prices until July 2025 in a bid to ensure Australian gas supply at “reasonable prices,” the government said on Wednesday.
Energy companies operating in Australia are rattled by last year’s cap on domestic gas prices, which has already led to at least one investment project being put on hold. The cap, introduced in December, was initially intended to last until the end of 2023 as a measure to curb spiking gas prices.
Now the government plans to extend the cap through the middle of 2025, exempting small producers from the price cap if they supply gas only to the domestic market. Larger producers can also be exempted from the price cap if they make supply commitments to provide enough natural gas for the domestic market.
The government’s draft proposal, the so-called Gas Code, is now open for consultation until May 12, 2023.
“The Gas Code will ensure sufficient supply of Australian gas for Australian users at reasonable prices, give producers the certainty they need to invest in supply, and ensure Australia remains a reliable trading partner by allowing LNG producers to meet their export commitments,” the government said.
Still, Australia’s main energy trade partners and allies are increasingly concerned about the latest proposals for energy market interventions in Australia, which could also undermine new investment plans in Australian natural gas and other energy resources. Earlier this year, the Australian government proposed reforms to the Australian Domestic Gas Security Mechanism (ADGSM), “to ensure that there is a sufficient supply of natural gas to meet the forecast needs of Australian gas consumers by controlling, if necessary, LNG exports.”
The imposition of a gas price cap and the proposal that the government has a say in LNG export volumes could be challenged by foreign investors, global law firm White & Case warned in February.
“The imposition of such measures is not without risk for Australia, which is a signatory to several investment treaties where key LNG companies are incorporated,” White & Case says.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.