Australia warns gas companies they risk export restrictions

Australia's prime minister warned energy companies on Thursday that they would be restricted from exporting gas if Australians are not also provided with adequate supplies at internationally competitive prices.

Prime Minister Malcolm Turnbull said it was unacceptable that Australia was about to overtake Qatar as the world's biggest exporter of liquid natural gas yet domestic gas users face shortages and sky-rocketing prices.

Australia is entitled under its international trade agreements to protect local industry from gas shortages by preventing companies such as ExxonMobil, Shell, Santos and Origin from fulfilling export contracts from July 1, he said.

"If there is a shortage of gas for the domestic market forecast, then export controls will be imposed so that Australian families and Australian businesses and Australian jobs come first," Turnbull told Australian Broadcasting Corp.

He said energy companies were selling Australian gas to Australian customers at prices four and five times higher than are charged in the Unites States. Australian prices should be more than halved, he said.

Malcolm Roberts, chief executive of the Australian Petroleum Production and Exploration Association, warned that restricting exports could worsen tight market conditions unless political and regulatory barriers to developing new gas supplies are removed.

"Restricting exports is almost unprecedented for Australia," Roberts said in a statement.

"At a time when we need billions in new investment to create more gas supply, any intervention which creates sovereign risk is alarming," he added.

A political divide is widening in Australia over future energy security. The center-left Labor Party wants more reliance on clean and renewable sources such as wind and solar. Turnbull blames the Labor government of Victoria state for contributing to the looming shortage by banning gas exploration.

Turnbull's conservative Liberal Party-led government argues renewable energy is unreliable and traditional sources such as coal and gas are still needed to avoid disruptions of supply and demand in the national grid.

Australian Energy Market Operator, which manages the national grid, recently warned of potential shortages of gas-fired electricity across southeast Australia by late next year.

Australian Industry Group, the country's leading association representing industry, welcomed Turnbull's comments.

"This is a very positive step from the government and it's something that industry has been calling for for some time," Group chief executive Innes Willox said. "It's just a pity that it's got to this stage where a lot of businesses are facing incredibly steep rises in their gas and electricity bills and we hope that over the time ahead those bills can come down."

Tony Wood, director of the energy program at the Grattan Institute think tank, said the government's move should guarantee supply in Australia. But it might not ensure that the prices paid by Australians would be as low as those paid by Asian customers.

"Gas prices will never return, in my view, to what they were five or six years ago before we had domestic gas open to the international market," Wood said.