Australia’s gas trilemma: prices, exports and emissions

Australia has put gas at the centre of its economic recovery plan from COVID-19. The Australian Government has announced a ‘gas-fired recovery’ under which low cost gas would underpin the revitalisation of Australia’s gas-based manufacturing sector and drive economic growth. These announcements come against the backdrop of Australia becoming the world’s largest LNG exporter; a development which has come at the cost of higher domestic gas prices for consumers on Australia’s east coast.

The Government’s gas-fired recovery plan seeks to reduce domestic gas prices by unlocking new gas supplies, and considers policies that would redirect potential export gas to the domestic market. Much hinges on the Beetaloo Sub-basin — an undeveloped and potentially world class gas resource, described as the ‘hottest play’ in the OECD. The focus on unlocking new gas supplies, however, is not without challenges. Emissions from Australia’s gas sector are significant. Australia faces a gas trilemma of simultaneously trying to reduce domestic gas prices, support its LNG exporters, and manage gas sector emissions.

This Insight provides an update on recent market and policy developments affecting Australia’s LNG exporters.

By: Nikolai Drahos