00:01I think the government had an opportunity here to really properly restructure the relationship
00:06between our domestic market and the international market and what they've announced today I
00:11can't see how this is going to have a material impact on price and I think it's going to
00:15mean we have continued worries about supply shortages on the east coast of Australia.
00:20Why is it not going to affect prices?
00:23So what they've announced today is that exporters will only be allowed to export what's called
00:28a spot cargo so that's a cargo that's kind of an opportunistic sending of gas overseas.
00:33They'll only be allowed to do that if they've shown that they have supplied the domestic
00:38market with 20% of the amount of that spot cargo.
00:42If we look at the data from last year only one supplier sent spot cargos overseas and if
00:49we look at take 20% of the total spot cargos that were sent overseas that's only about
00:532% of total east coast demand and 2% is really not enough to have a material impact on
00:59price.
00:59OK, so it's not 20% of exported supplies which would remain on shore.
01:07No, that's right.
01:07That's right.
01:08It's only 20% of what they call spot cargos.
01:11So what percentage would make a difference if it were kept on a shorter price?
01:16Well, what would be better would be to actually look every year and think about how much actual
01:21gas do you want in the market.
01:22So rather than using a blunt percentage, figure out how much gas we actually need in the domestic
01:28market and then implement that as a percentage across the total base of exports.
01:34But to give the exporters a choice about how they find that gas.
01:39So they might find it by increasing their own production.
01:42They might find it by paying one of the domestic producers to increase their production, or
01:47they might, if the counterparty agrees, agree that some gas that was going to be sent overseas
01:52on contract stays here in Australia.
01:54What we've got instead is something that I think will just mean that we end up with very
01:59small amounts of gas coming to the Australian market in the probably over the next decade.
02:05And then in the late 2030s and 2040s, we're suddenly going to find that there's going to be a whole
02:12lot
02:12of gas that comes into the market because it will start to apply to the new contracts.
02:17The thing is that by then, most households will have stopped using gas.
02:21Those industrial facilities that are really struggling with, you know, challenging international
02:26conditions at the moment will probably have gone out of business.
02:29So we're going to have a whole lot of gas sloshing around that no one actually wants
02:33in the late 2030s to the 2040s, and not enough now when we actually need it.
02:38So in the near term, then, what's going to happen to gas prices?
02:41How high could they get?
02:43At the moment, gas prices have been pretty flat since the start of the war in Iran.
02:48I suspect there has been a little bit of an effect there that the industry knew this was coming.
02:53And so they have been deliberately offering their gas at lower prices because they didn't
02:57want to have the gas reservation and also the fact that there was a gas tax rattling around
03:03as well.
03:05I think there was a little bit of that going on.
03:07The real test is going to be when we start to get into June and July, because that's when
03:12the demand in North Asia goes up a lot because it's very hot and humid.
03:17But it's also when our demand goes up a lot because it's not hot and humid.
03:22It's cold.
03:22It's winter.
03:23And so that's going to be the real test as to what happens with prices.
03:28This is still a big policy move, though, isn't it?
03:31Our national affairs correspondent, Jane Norman, was saying earlier in the hour, it's the biggest
03:35intervention in the market for a decade.
03:37So it's significant.
03:39It is significant.
03:40And one thing that it does do is it replaces a patchwork of stuff that had been put in place
03:45by successive governments, both to try and manage concerns about shortages and also to
03:51manage concerns about prices.
03:53And so it's replaced that with one single framework.
03:56I think that's good.
03:58You know, it means that we've got one clear set of rules that aren't sort of all weirdly
04:02interacting with each other.
04:04And it's a lot clearer as to, you know, exactly what can and can't be done.
04:09The problem is just that what they've chosen to make those clear rules around is not going
04:15to deliver a lot of gas to the Australian market in the short term.
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