Gas crisis 'three times bigger' than thought, Turnbull says

The looming gas crisis is three times worse than previously thought, according to Prime Minister Malcolm Turnbull, who has ordered gas giants and state governments to shore up gas supplies to east coast consumers or face strict export limits.

Mr Turnbull on Monday said the government had received two reports from the Australian Energy Market Operator and the Australian Competition and Consumer Commission, showing gas shortages in the east coast domestic market over the next two years "will be considerably higher than that estimated six months ago".

"It's estimated there will be a shortfall ... of around 110 petajoules of gas - more than three times the figure we were advised earlier in the year," Mr Turnbull said.

He said recent rises in gas costs were the "single biggest factor in the current rise in electricity prices" because gas sets the wholesale electricity price.

The looming gas crisis is three times worse than previously thought, Prime Minister Malcolm Turnbull says. Photo: Patrick Hamilton

The looming gas crisis is three times worse than previously thought, Prime Minister Malcolm Turnbull says. Photo: Patrick Hamilton

"More expensive gas has huge implications for industry and for struggling families but it feeds directly into the electricity market," Mr Turnbull said.

"We will not let the power bills of Australians rise further and further because of a shortfall of gas on the east coast of Australia."

Mr Turnbull said the government's controversial powers to limit gas exports would be invoked if exporters and states with gas development bans did not show how the shortfall will be met.

The limits, known as the Australian Domestic Gas Supply Mechanism, were introduced on July 1 and allow the government to intervene to ensure sufficient supply of natural gas to meet the predicted needs of Australian consumers. It would require LNG projects that draw gas from the domestic market to limit exports, or find offsetting sources of new gas.

The mechanism has been designed to come into effect at the start of a calendar year, and decisions on the level of shortfall and restrictions applying to each exporter must be made before November 1.

Mr Turnbull said the government's foreshadowing of export controls earlier this year meant "more gas brought into the market ... but it has clearly not been sufficient to date".

Gas exporters are staunchly opposed to export restrictions, which they say create a sovereign risk.

However the Australian Industry Group says pressure should be applied to gas exporters to ensure industrial businesses can access affordable, plentiful gas supplies. Industrial users comprise more than 40 per cent of Australia's gas use.

Mr Turnbull said he had been in talks with the chief executives of major gas exporters and "we expect them to demonstrate to us ... [that] they will ensure that there is not a shortage of gas next year on the east coast".

He also pointed to a "comprehensive failure" by some state governments to develop gas resources.

"Queensland is producing most of the gas on the east coast of Australia. But both Victoria and New South Wales are not doing enough," he said, adding that NSW should approve Santos' contentious Narrabri Gas Project.

Victoria's Andrews government last year banned the gas extraction process known as fracking, in response to strong community concern. In Coalition-led NSW there is a ban on the use of so-called BTEX chemicals in fracking, as well as bans on coal-seam gas exploration within two kilometres of residential areas and in key horse breeding and viticulture areas.

Mr Turnbull also blamed Labor for allowing gas exports from Queensland and failing to protect the interests of domestic customers. Labor said it had repeatedly called on the government to implement gas export limits reduce power bills.

Resources Minister Barnaby Joyce, who has responsibility for the gas trigger, was not present at the Prime Minister's press conference, which was attended by Energy Minister Josh Frydenberg and Treasurer Scott Morrison. Mr Turnbull said Mr Joyce was attending to duties in his electorate.

Labor says Mr Turnbull has ignored "serious questions" surrounding the legitimacy of decisions made by Mr Joyce, who is embroiled in Parliament's citizenship fiasco before the High Court and may not be eligible to sit in Parliament.

NSW Energy Minister Don Harwin said the state's gas plan was science-based, gas exploration was ongoing and new areas for exploration had recently been identified.

Gas exporter Origin said it was aware of the need for reliable gas supply at sustainable prices.

"We continue to actively sell gas to domestic customers and our recent sales demonstrate we are making supply available and prices have come down rapidly from a peak in April," said Origin's head of energy supply and operations, Greg Jarvis.

The Australian Workers' Union on Monday accused Mr Turnbull of giving "yet another reprieve to multinational gas exporters who are denying Australian gas to local businesses and households".

- With Cole Latimer

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This story Gas crisis 'three times bigger' than thought, Turnbull says first appeared on The Sydney Morning Herald.