Tough new rules weeks away for $70b Curtis Island plants

REALITY is sinking in that Curtis Island's three $70billion plants are just one month away from new, heavy scrutiny from the Federal Government.

A draft of the Australian Domestic Gas Supply Mechanism released this week detailed how Resources Minister Matthew Canavan will implement new restrictions on gas exports.

The mechanism, in place by July 1, gives the government the power to restrict or ban LNG exports when there is a shortfall of gas supply in the domestic market.

It has shone a spotlight on Gladstone's three LNG plants, which rapidly tripled the east coast demand when they began exporting, causing upward pressure on domestic prices.

Fears that Australia could run out of gas as soon as 2019 and domestic prices rising to almost $20 a gigajoule were the catalysts for the new restrictions.

"At a time of acute market tightness this risks impairing Australia's gas supply security and adds pressure to prices which are at, or above, export parity," the draft read.

"The prospect of industrial 'demand destruction', as well as higher household costs due to higher than internationally benchmarked gas prices, is not sustainable."

Santos' Gladstone LNG site remains as the project most likely to face restrictions.

While QCLNG and APLNG sell more gas to the domestic market than they buy, GLNG continues to use the most third-party gas to fill its exports.

GLNG was approved under the condition it would need to use third-party gas to fill exports but it was unclear how much they would use.

Gas industry body Australian Petroleum Production and Exploration Association will make a submission against the new mechanism, claiming it's a short-term "fix" instead of a solution for the tight market.

Chief executive Malcolm Roberts worried the restrictions would impact future investment in LNG projects.

His concerns were echoed by Gladstone Deputy Mayor Chris Trevor, who said the new rules could "kill" our LNG industry.

"It's time the debate shifted from short-term politics to lasting solutions," Mr Roberts said.

APPEA and other gas industry bodies are pushing for states such as Victoria and New South Wales to lift gas exploration moratoriums.

Cr Trevor told The Observer last month, "(It) is a decision which I believe can strike at the very soul of our industry-based community."

The Curtis Island LNG sites are unique in that they are the only sites in the nation that take gas from domestic markets.

The mechanism is based on a yearly evaluation of whether a domestic gas shortfall is anticipated.

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