The Solution: Gas reservation: how it works elsewhere
Every major gas producing nation in the world has some form of gas reservation policy - or equivalent laws aimed at ensuring local industry and consumers are not disadvantaged by gas exports. Every nation, that is, except Australia.
Although schemes introduced by governments across the world vary in method and approach, the goal is common: to ensure the national advantage of relatively affordable gas is not wiped out through export links to the global price.
Israel, Indonesia, and Egypt have laws mandating that a percentage of gas extracted must stay within their domestic markets. Israel reserves 60 per cent of its offshore natural gas. Egypt has legislated that a third of gas production be directed to domestic consumers. Indonesian reservation is applied on a case-by-case basis to new projects, but reservations of up to 40 per cent have been agreed to in recent years.
In the USA the export of LNG is regulated by the Natural Gas Act of 1938, where exports must be found to be in the ‘public interest’ by the Department of Energy (DOE). The existence of the public interest test is deliberately loose and allows the US to maintain control over its export volumes and ensure that any increase in LNG demand does not outstrip available supply and create shortages in domestic markets. Canada has similar ‘public interest’ laws around the export of its gas.
Norway, Qatar, Russia, Algeria, and Malaysia ensure domestic advantage from their gas reserves by having state-owned companies taking the role of dominant producer.
Despite these various restrictions there is no evidence to suggest global investment in any of these nations’ gas reserves has been hampered.
The Western Australian example:
Western Australia is the only state in Australia with a gas reservation policy. Under Western Australia law, 15 per cent of all the gas produced in that state has to stay in the state. Western Australia’s Liberal Premier Colin Barnett has indicated he wants the WA example to be spread nationally. Western Australia’s gas reservation scheme has been able to guarantee domestic supply at attractive prices, whilst still allowing investment in the LNG industry and a healthy level of exports.
Australia today is the only nation allowing the export of its gas without any restrictions aimed at maintaining a national advantage.