Forcing gas producers to sell to Australia won't 'crash' prices, King says

The resources minister says gas prices will not crash under national reservation laws, but refused to say how much they will fall as the industry warns the government is pushing too hard.Madeleine King said she wanted the proposed laws to make prices fairer while ensuring new gas projects would still be profitable enough to proceed."Allow me to be clear: we need gas to support the rollout of renewables. We need gas to have a strong Australian manufacturing industry. We need gas to continue heating our homes," she said.The legislation introduced to parliament this morning would force producers to sell up to a fifth of their gas slated for export to Australia, pushing down wholesale prices by sparing the country from having to compete with the international market for its own resource.How much gas producers will be required to sell to Australia each year would be set by the energy regulator, with a target amount of 110 per cent of Australia's actual needs. The government says the "modest oversupply" will put downward pressure on prices for consumers.But after being burned by its failure to meet a previous promise to cut home power bills by $275 through renewables, which was thrown off course by Russia's invasion of Ukraine driving up gas and fuel prices globally, the government has been reluctant to put a price tag on how much prices would be expected to fall under the scheme.The resources minister told the National Press Club that the rules for gas producers had been carefully balanced, but that information was commercially sensitive."We have done a lot of study and a lot of analysis and, I might add, that so has just about everybody else in relation to this," Ms King said."A lot of the modelling that we have done, or the analysis that we have done, is commercial-in-confidence, so it is difficult."She said the government would release an impact assessment related to its gas reservation laws, but did not commit to that including estimated impacts on wholesale gas prices."Our focus is on making sure there is this modest oversupply, and that demand calibration is really important, as well, in this," Ms King said."We all know having too little gas to firm renewables or provide for the manufacturing industry is as dangerous as having a massive oversupply which crashes the market, but also it can undermine investment in renewables, so it is a really fine balance we have got to achieve here."The resources minister said the bill's focus was to make gas cheaper for heavy industry and energy generation, but added that an important element was ensuring cheaper gas prices "will be felt by the consumer".'Sugar hit' will hurt in long-term, industry saysThe gas industry has warned that the government's plan could force the sale of gas at rates that are cheaper than it costs to produce.It says the scheme might provide a "sugar hit", but would make future gas projects unviable and dry up supply in the long-term."The government cannot expect industry to invest billions of dollars in new gas supply while introducing policies that fundamentally undermine the commercial viability of those investments," Australian Energy Producers chief executive Samantha McCulloch said.The Coalition has indicated it will work with the federal government to create a national gas reservation scheme, but says "numerous questions" remain about how future supply and investment will be assured."Reserving gas on paper is one thing. Ensuring we have the supply, investment, and infrastructure to deliver affordable, reliable energy to Australians when and where they need it, is another," Shadow Resources Minister Susan McDonald said in a statement.The gas reservation scheme is meant to provide a long-term fix to issues that emerged after the invasion of Ukraine in 2022.Wholesale gas prices soared from their average of less than $10 a gigajoule to $60 a gigajoule amid the interruption to global supply.The federal government rushed in temporary fixes, including a one-year cap of $12 per gigajoule on gas prices, but a government review of the gas market found those had not been "sufficient" to place downward pressure on prices, and longer-term answers were needed to give the industry confidence to continue investing.It also noted that new production and infrastructure to get gas from the north to south-eastern Australia was "critical" to ensuring lower prices.