Australia to consider reserving some gas for home market

* Potential gas reservation only for future projects

* Western Australia's gas reservation to remain in place

* States urged to lift drilling bans (Adds resources minister comment)

MELBOURNE, Aug 6 (Reuters) - Australia, the world's top liquefied natural gas exporter, on Tuesday said it would consider forcing gas producers to reserve some supply for the domestic market, as it looks to cut energy bills for households and manufacturers.

Resources Minister Matthew Canavan and Energy Minister Angus Taylor said they would review a range of policies, including so-called gas reservation, pipeline access and price transparency to come up with options by February 2021.

Australian conservative and Labor governments have long resisted calls for domestic gas reservation on the view that interfering in the market could distort prices and deter new production in the long run.

However, following a tripling in wholesale gas prices over the past five years after the start-up of liquefied natural gas (LNG) exports from eastern Australia, the government has come under pressure to boost supply and cut prices.

"Past approvals of large gas export projects have not adequately considered the impact on the domestic gas market and that has contributed to some of the pressures we have seen in recent years. We cannot afford to repeat these past mistakes," Taylor and Canavan said in a joint statement.

Any gas reservation would not affect the state of Western Australia and would only apply to future developments, Canavan said in a televised media conference.

Two years ago the government introduced the controversial Australian Domestic Gas Security Mechanism, which requires the resources minister to decide each year whether to limit LNG exports from Queensland state to avert any forecast local shortage.

So far it has not pulled that trigger, and now plans to review the mechanism. Taylor and Canavan also said they would pressure states to lift their restrictions on onshore gas drilling.

Gas-reliant manufacturers, such as chemicals makers, steel makers and food processors, have long called for gas reservation to boost supply as soaring energy prices have hurt profits and led to plant closures.

They point to cheap prices in Western Australia, the country's biggest exporter of LNG, which has long required producers to sell 15% of their output to the domestic market.

"If we want to power a resurgence in Australian manufacturing ... then there is no more important task than reforming the domestic gas market," industry group Manufacturing Australia said in a statement.

Australia's petroleum industry said it would work closely with the government on its gas policy review, but warned that market intervention could come at a cost, including increasing the perceived risk of doing business in the country.

(Reporting by Sonali Paul; Editing by Stephen Coates and Joseph Radford)

2019-08-06 07:19:52

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