Press conference on ACCC report and gas reforms, Parliament House, Canberra

media conference
Press conference discusses the Government's response to the ACCC Gas Inquiry interim report, and the Australian Domestic Gas Security Mechanism

MADELEINE KING: Good morning, everyone, and thanks for coming along this morning. I just want to start by acknowledging the Ngunnawal country and acknowledge elders past, present and emerging here in the parliament and across this district.

As we all know the Treasurer has this morning released the latest interim report from the ACCC gas inquiry. The key ACCC finding is that Australia’s east coast gas market faces a potential 56 petajoule shortfall in 2023. That represents about 10 per cent of annual east coast demand for gas or around 14 LNG carrier cargos.

The ACCC report is an early warning of the potential problems we are facing in the energy market under the mess quite frankly left to us by the former government. Today I’m going to announce a series of measures and actions in response to the ACCC’s warning. These measures will ensure that Australian householders and businesses will continue to have access to reliable energy into the future.

Now I’m going to outline these responses in a clear order, so please do bear with me and we’ll take questions after that.

First of all, I want to announce that after consultations with industry and stakeholders the government will extend the life of the Australian Domestic Security Gas Mechanism to January 2030. The mechanism was due to expire in January next year, and we flagged our intentions to extend this mechanism in early June. There will be a further review in 2025 of this mechanism and it’s ongoing longevity.

This announcement will ensure the ADGSM remains a lever for the government to use to help safeguard our domestic gas supplies. This extension will be done by regulation. That work is currently underway and that process should conclude by later this month. Without having taken this action – one of the first decisions of the government – this mechanism would not be available for us to use.

Secondly I’m announcing that the government will open consultations on reforms to the existing ADGSM to ensure that it is an effective tool and is fit for purpose. At present, as many of you know, this mechanism takes a long time to activate. It can only be used to avoid a forecast shortfall in the next calendar year. The government wants to make sure that the ADGSM is improved, is fit for purpose and can be activated at short notice to help with the potential shortfall. It is a complex mechanism. It’s a blunt instrument and it is a measure of last resort. It allows the government in the event of a predicted shortfall to restrict exports to ensure enough gas is available for domestic use.

The ADGSM reforms will be considered in line with the following seven key principles: ensuring sufficient supply of gas to the domestic market to support manufacturing and energy security; putting downward pressure on to domestic gas prices; maintaining Australia’s position as a leading contributor to global energy security; respecting the trust trading partners and international investors have shown in Australia’s resources and energy sectors; supporting the energy transition in line with Australia’s emission reduction targets; enhancing transparency and processes that support competitive pricing outcomes for gas consumers; and also minimising implementation costs and complexity for government and industry.

Thirdly, today I announce the government will start negotiations on a new Heads of Agreement with major gas producers. Like the existing ADGSM, the current Heads of Agreement will expire in January next year. The Heads of Agreement is an agreement that ensures uncontracted gas is offered to Australian users in the first instance to help avoid a forecast shortfall. As I said, both of these instruments are due to expire in January. In another episode of gross negligence, the previous government failed to renew the Heads of Agreement as well.

And finally today I’m announcing that I am preparing to issue a notice of intent to make a determination as to whether to trigger the ADGSM – that’s the existing ADGSM. This is the first step towards using that mechanism for next year. After the notice of intention is released gas producers will have the opportunity to provide information on gas production, planned export volumes and the market outlook.

This is their opportunity to demonstrate that there won’t be a domestic shortfall next year. I’ll also consult other governments and relevant stakeholders. We will also have talks with our very important and key trading partners.

Australia takes its reputation as a reliable, trusted and stable trading partner extremely seriously. We will reassure our trading partners that, like many countries around the world, we are managing our domestic gas security.

The notice of intent can only be issued once the regulations extending the ADGSM are in place. This is a measure that could have happened earlier before the election but did not happen. As I said before, one of the first decisions of this government was to extend it, and we are doing so. Either way, I’ll make a determination in regard to the current ADGSM by – in October, by early October, sorry.

These measures announced today will safeguard Australia’s energy supplies. They are designed to work hand in glove with work being done by the energy ministers around this country, and including federal Minister Bowen, and that work is ongoing.

The Albanese government will do whatever is needed to make sure Australians have ongoing access to the gas and energy sources that belong to the people of Australia. I thank the major gas producers for their engagement on this issue so far and for the willingness that many of them have demonstrated to me to help us solve these important issues. I thank the ACCC for its comprehensive report. It’s an important early warning to us all about the potential problems we’ll face if we don’t take action now.

The measures I have announced today will ensure we can keep the lights on and our industries operating over the next 12 months and, of course, well into the future. Gas accounts for around 7 per cent of electricity generation in the National Electricity Market, which is the east coast by and large, with coal accounting for 65 per cent, with around 28 per cent for hydro, wind and solar. It is an important component of our energy mix. It is not the only component of our energy mix.

The government will not be in a position to actually trigger the mechanism until likely the end of this month, as I’ve said before. Gas producers need to be given time to provide information on production and I will need to consult with stakeholders and trading partners in relation to the execution of this mechanism.

With that, everybody, I’m very pleased to take questions.

JOURNALIST: Minister, we had a review into the trigger you announced a few weeks ago. Did that review look at replacing – activating the trigger with price rather than supply? Have you given any thought to that and is that still a possibility or are you happy with the supply being the mechanism?

MADELEINE KING: As I said earlier, there are seven principles that will guide our ongoing review into the new ADGSM, for want of a better word. One of them is putting downward pressure on gas prices and also making sure that there will be competitive pricing outcomes. So price is the factor that’s been very important in the recent crisis in May when we first came into government. And so it will be a part of our consideration and consultation.

JOURNALIST: Minister, your statement says that based on the forecast shortfall the government needs to see firm commitments from the LNG exporters. I mean, is that a tacit admission that as it stands over coming months that the government has no measures that it can, you know, force the dial, so to speak and to make sure that extra gas supply comes into the domestic market? I mean, do you have any tangible measures that you can offer for greater supply to domestic gas users?

MADELEINE KING: Right now – well, the legislative triggers we don’t have because the ADGSM wasn’t renewed. We’ve renewed it – or working to renew it. There is a process around changing regulations to extend it, and we are abiding by those processes. We’re extending it as soon as we can to make sure it’s available.

So right now today the ADGSM is not available for trigger because it will expire. What is available to us is obviously the work of AEMO and talking to the gas producers, my work in talking to the gas producers. And that has led to tangible outcomes. But I don’t think it is sustainable for every time there is an issue like this for that to be how we manage our gas supplies in this country where everyone has to suddenly get on the phone like that suddenly solves it. There needs to be a sustainable outlook and a process where – and a pledge and a promise whereby there is a secure domestic gas supply.

JOURNALIST: Minister, you’re very polite about the sector where the ACCC has been quite scathing about almost unconscionable conduct where there’s a Heads of Agreement, in effect, an agreement between the government and companies that they will act in the best interests of consumers. They clearly haven’t. They’ve been making billions of dollars in profits selling a resource which is owned by the Australian people. What’s your message to those who have been making those many a billions of dollars’ profit at the great expense of Australian consumers?

MADELEINE KING: The ACCC report is damning. No doubt about it. It sets out patterns of behaviour, instances of behaviour that are clearly not acceptable in an environment where we do have, you know, internationally and domestically, a supply – energy supply crisis to say the least. So my message to the gas producers is to please read the report. Know that this government is determined to make sure there will be adequate supply for Australians and a reasonable access to it and to manufacturers as well.

JOURNALIST: [Indistinct] Australian consumers, because that’s what the report suggests.

MADELEINE KING: I think the report suggests that there are issues in the industry and they need to be fixed. What we saw is that ever since the ADGSM was first enacted that the commitment to supplying domestic gas has decreased, and there’s a graph in the report that says that. Which goes to prove that the ADGSM in its current form is not that useful. This was the big stick legislation which is now more like an impotent tool. So this is why we need the reform in this industry. We need the Heads of Agreement to work. That’s a very important part of the puzzle that focuses on the uncontracted gas in this market. So I urge people if they’re interested in this topic – and, of course, many people are, and rightly they should be – to have a look. Just look at the executive summary of the ACCC report. They will cast their own judgments, and the gas producers know this is damning for them.

JOURNALIST: Minister, would you like see the New South Wales government remove whatever roadblocks there are to get Narrabri gas into the system?

MADELEINE KING: I think it’s important that state governments and territories look at what’s available to them. I am not here to tell them what to do. They will make their own decisions for their own communities. It’s logical to me as the Federal Resources Minister that more reserves closer to where consumers are makes more sense rather than trying to force things down pipelines that aren’t big enough or ship things around the country, which will make gas more expensive. So this is a matter – those are matters for the State governments to address, and I’m sure they are looking at it.

JOURNALIST: Minister, I think you’ve got to now get some legislation through to extend this trigger to 2030, you said. What do you say to groups like the crossbench, the Greens in the Senate in particular, who want to get rid of gas altogether? Are you worried at all that they will try and use this as a way to get some other item into that legislation? And also, beyond the verbal assurance, what are you saying to our offshore allies who need this gas because they’ve got to get off, for instance, Russian gas in the [indistinct] area, the Japanese?

MADELEINE KING: Just in relation to the mechanism, it’s by regulation, so that will happen. That’s already in train. It’s just a process of consultation and redrafting of regulations. So that doesn’t come before the parliament. It will be extended, but it’s still got a couple of weeks to go through that process.

In relation to our international trading partners, the export industry, the gas export industry of Australia right across the country would not exist but for our international partners having invested in it. We don’t have the population or the demand for gas. It feels like we have a great demand for gas right now in this kind of crisis situation. But we simply don’t have that magnitude of industry, that population, that would have had Australian investors creating an industry like we see on Curtis Island.

So we have to respect the investment they have made, the commitment they have made to our country, the jobs they have created in this country. By the same token, we have to be assured that Australians will have access to gas. At the moment in the energy market, I would note that it is coal that is providing most electricity to this country.

JOURNALIST: The gas lobby has labelled calls for intervention irresponsible. What can they do to avoid the government doing that?

MADELEINE KING: They can engage in constructive discussion with me in negotiating the heads of agreement to make sure they have firm commitments to provide domestic gas to the southern states into the future.

JOURNALIST: I’m sure you’re aware as part of the discussions around the climate targets bill there’s some discussion around a climate trigger in environmental law. As Resources Minister what’s your position on that?

MADELEINE KING: I will lead – that’s a matter for the Environment Minister to look at, Tanya Plibersek.

JOURNALIST: You must have a view.

MADELEINE KING: I’m not going to state a view, no. That is for the Environment Minister to –

JOURNALIST: As a proud Western Australian?

MADELEINE KING: I am a proud Western Australian, you are right, Andrew. It’s a matter for the Environment Minister, and I won’t be intervening in other portfolios.

JOURNALIST: Minister, the ACCC report revealed energy companies trying to sell excess gas on the global spot market. The big three exporters and the [indistinct] control 90 per cent of the market and some exporters are not engaging with the domestic market in the spirit of the Heads of Agreement. What is the government going to do to remind gas companies of their social licence, and have they lost some bargaining power as we renegotiate the HoA?

MADELEINE KING: I think your assessment is right; there is a decline in the social licence for these gas producers. But, you know, I would say without them there would be even less gas in the domestic market. So it is important their work continues and that the gas out of Queensland is becoming something that the southern states are increasingly reliant on. The Bass Strait reserves are declining faster than anyone predicted. That, you know, is no-one’s fault, it’s just a fact. So what we see is Victoria and New South Wales more dependent on Queensland and those three gas facilities.

But, you know, people make their own assessments. People in this room will make assessments and their readers will, you know, read the paper and make observations around that social licence.

JOURNALIST: Isn’t the only assessment that you can make is given the circumstances that you point out that Victoria and New South Wales need to start exploring for more gas and exploiting it?

MADELEINE KING: Victoria and New South Wales, their governments will make their own decisions. They're absolutely right. I know both those governments will work in the best interests of their communities and their manufacturing communities. It would make sense I would think – I’ve said this earlier – for gas in those states to be used. But that is a matter for them. And I’m not here to, you know, hack into other State governments. I really want to work collaboratively and cooperatively with them. And if there are discussions to be had about further exploration in gas or exploitation of existing fields that they know exist, you know, I’m not here to say we’re going to rush through any approvals. That’s inappropriate. Approvals go through a proper process at all times. But, you know, that will be up to those State governments.

JOURNALIST: Minister, you indicated at the beginning exactly how much gas you think is required, which is 14 tanker loads. Do you mean 14 tanker loads per year? And, really, the question is about whether there’s enough there that’s not currently contracted. Because my understanding is, you know, the amount going to the spot market is maybe 10 per cent or less of the production at the moment. Is the amount going to the spot market enough to meet the needs that you’re setting out here? Or are you really going to require the gas producers to start renegotiating contracts with those international customers because more of the gas is going to have to stay here?

MADELEINE KING: Certainly. It’s 56 petajoule shortfall, which is 14 cargos. That’s what’s predicted for next year based on the ACCC findings. I won’t go any further into further years than that. As for the existing contracts, these are long-term contracts. You can’t build a facility or these facilities on Curtis Island without long-term contracts. Like, you can’t build the North West Shelf or the INPEX facility in Darwin without long-term contracts and extraordinary amounts of investment from international partners to do them.

Nonetheless, there is an imperative to have a secure supply into the southern states, and we will be working with all three of the facilities, the companies involved, if need be international partners, to see how we can work together to make sure the Australian east coast has a secure domestic supply, because that crunch is not felt elsewhere at the moment.

JOURNALIST: A quick follow-up: should we send less gas to China because we need it more here?

MADELEINE KING: Again, these are international long-term contracts. They are important. There is no utility in Australia seeking to break international long-term contracts. We depend on international investment not just for gas, you know, for iron ore development, for so many things in this country. We want to be known and remain as we are known as a reliable trading partner.

JOURNALIST: The ACCC report says if it’s exported, if the gas is exported there’ll be the shortfall that you’ve described. Then that’s the uncontracted gas they’re talking about. Do we need to pump more gas?

MADELEINE KING: Well, supply is the issue. But, you know, all these facilities have nameplate limits and production limits, I think they don’t all have the gas trains built that they have permission to. And that’s a planning issue and an investment issue. So, you know, there is a limit to what you can drive through an LNG facility. I don’t know how many of you have seen them. They’re pretty extraordinary pieces of kit. And they have a lot of technology, it’s dangerous work, and there has to be plant shutdowns. So it’s a complex industry and they have production targets. And this is some of the difficulty around a domestic gas mechanism as well, is that these are very complex operations.

I’m just going to go to someone who hasn’t had a question.

JOURNALIST: Minister, Australia has quite limited pipeline capacity. So even if you were to, you know, bring back international gas back into the domestic market, there would be a limit to how much you could actually pump into the market, correct? Are there any discussions among the government or with State governments about increasing that pipeline capacity to allow for greater feedback into the domestic market?

MADELEINE KING: Yeah, you’re right; there is pipeline capacities. But the mechanisms around the pipelines are also complex. I don’t mean to avoid the question, but that will be a matter in the wider energy review that Minister Bowen is doing as well. It’s an extraordinary system. The gas pipelines are often at capacity. And they’re certainly, you know, off and on capacity at the moment as we have this winter that is ongoing and colder than usual, yes.

JOURNALIST: The ACCC report confirms that there is more than enough gas being produced in Australia to easily meet domestic demand at any time. Do you think – what I’m getting at, does it reveal that you think perhaps domestic gas buyers have stuffed up their purchasing strategy, they should have signed longer-term contracts, they’re a bit too over-reliant some of them on the spot market? Do you think we need – like, do you think industry might need to rethink their strategy moving forward now we’re in this brave new world of energy crunch?

MADELEINE KING: Yeah, sure. It is difficult for manufacturers. There’s no doubt about it. The gas industry and the price of gas went very low during Covid in 2020 and manufacturers were able to take advantage of that. The flipside is now. And what we’re seeing now is not driven by domestic factors; it’s principally, you know a supply crunch around the world that is driving this.

But there were actually – I’m wrong in saying it’s not entirely, because there was the coal issue in the May pricing crisis so to speak when we had, you know, unplanned shutdowns of coal-fired generators and wet coal and mines that were flooded. So there’s a whole lot of things that affect those prices.

JOURNALIST: But they were choices that domestic gas buyers made, and they made the choice, some of them, to rely on spot market, not long-term contracts, and now was that an error? Do you think we should..

MADELEINE KING: I’m not going to pass judgement on commercial decisions. I mean, they might think it was a bit of an error, but they probably couldn’t predict that Russia would illegally invade Ukraine either.

So can I just go to the back; I just know you haven’t a question.

JOURNALIST: No worries. Minister, obviously all this talk of the energy crunch, the people who are going to feel the brunt are going to be small businesses, families. Can you give them an assurance that things will get better? How long do you expect this energy crunch to last?

MADELEINE KING: This – it’s very difficult. There’s no doubt about it. Ten years of inaction on energy policy and multiple policies – 22 at last count – have left us in a dire situation in regard to the reliability of energy and its supply. This government will do all that it can to make sure that there is sufficient supply for ordinary household consumers and also for manufacturers. And the states are pretty focused on this, too, those that are suffering under this burden. So I can’t provide any guarantees. The only guarantee I can provide, sorry, is that we are working very hard to make sure this is resolved.

You had a question.

JOURNALIST: Minister, I know your attention is very much on gas today, but the brewing and hospitality industry say they’re disappointed beer is about to be hit with its biggest tax increase in 30 years. Is the government open to providing beer tax relief in the budget?

MADELEINE KING: I’m not going to comment on that at this stage. I like a beer myself. I’ll have to leave that with the Treasurer to comment, I’m afraid.

Can I go back to you, Phil.

JOURNALIST: With respect to Chris’s question about Narrabri and conventional onshore gas in Victoria, you’re choosing not to state – you know, to push the states. Your predecessor had no such hesitation, as does the gas industry. I know you’re saying again today one of the alternatives for the gas industry is to get this gas out of the ground. Narrabri has been dragging its chain in terms of approval for years. Dan Andrews and his minister, you know, they dragged the chain on [indistinct]. Is your hesitancy to push the states related to the climate concerns that perhaps your opponents didn’t quite share? Is that why you’re not pushing this?

MADELEINE KING: Didn’t quite share?

JOURNALIST: Well, they want to get gas out of the ground and saturate the east coast market.

MADELEINE KING: I take your point.

JOURNALIST: Are you hesitant from a Labor perspective because of the climate considerations?

MADELEINE KING: Well, I would note that the former minister, whether it be the Resources or the Energy Minister, the approach they took of attacking state governments didn’t work, did it? I mean, the evidence is here today. Those situations have not changed in those states. It would seem like lunacy to follow that path, and also it’s just not my style. I don’t think it’s helpful to beat people over the head. I don’t think it’s helpful to refer to legislation as a big stick. I don’t think it’s helpful to call it a trigger, either, to be honest. It’s just language that, you know, imputes violence that I don’t like. I think we need to work together on these things. I know the states are very activated around their energy needs, and they will have to have, you know, a pretty decent think about what needs to happen.

As for Narrabri itself, you know, there is a lot of approvals required. I’m not sure if there’s anyone in particular to blame on this, whether it’s the proponents, some of their applications. I simply just don’t know. And the State government, my understanding is Matt Kean’s quite keen on that being developed. So, you know, there’s a lot to work through and, you know, I’m not here to push people around.

JOURNALIST: Further to Phil’s question, it goes I suppose to the philosophy that you’ll bring to your portfolio. You’re a West Australian, resource-rich state, you mentioned before that coal is 70 per cent of power generation, gas 7 per cent. You are a minister in a parliament where there’s a lot of people who don’t want coal anymore, who don’t want gas anymore. What do you see your role as – the Truth Teller or Miss Reality? What is your role here as Resources Minister who actually wants to pursue the interests of that industry as well?

MADELEINE KING: Certainly. The reality I think sometimes people don’t grasp is the dependency on the burning of brown and black coal in this country for its energy mix. And that’s an historical – that is a resource that has been simple for Australia to exploit and to use for its own power generation. In the last 24 hours brown coal accounted for 60 per cent of Victoria’s power generation and New South Wales black coal accounts for 80 per cent – that sounds like a pager – in Queensland 75 per cent and in Western Australia, which also has a heavy gas content, around 47 per cent. Coal does account for 33 per cent of our power generation at the moment, although the McGowan government is committed to turning that to zero.

So there is a reliance on coal at the moment. And it will take a lot to turn that around. But the states involved are really determined to make sure they do it. The Australian government is determined to reach a net zero emissions position. We have policies we took to the people at the last election. And now in government we’re seeking to implement them.

We can’t turn around 10 years of neglect in 10 weeks, but we’re going to do our best. It is important to note that the energy mix around the country is vastly different. Like, in Tasmania, you know, they’re basically fired by renewables in terms of hydro and wind and also there’s a high content – wind power content in South Australia. So different states are at different parts of their transition so to speak. The challenging parts of the transition are for the states that heavily rely on coal. Absolutely.

JOURNALIST: Minister, the ACCC report had some pretty pointed language about the joint venture marketing of the big players and that this was affecting the kind of price and the volume that domestic users are getting. What’s your view on those arrangements?

MADELEINE KING: The ACCC make a good point. There are good points right throughout that report. We will be going through it in more detail and I’ve no doubt these points will all be raised in the review of the ADGSM but also AEMO’s further work and Minister Bowen’s work on that as well.

MADELEINE KING: More and then you, is that okay. Thank you.

JOURNALIST: Minister, no-one does gas and coal and hydrogen all at the same time like Queensland. When can we expect you up that way?

MADELEINE KING: Sorry, what was that again? No-one does it like Queensland?

JOURNALIST: No-one does it like Queensland. And as part, I guess, of renegotiating agreements as well, when can we expect you in Queensland?

MADELEINE KING: I think I’m scheduled in Queensland next week, actually. But I go to Queensland quite a bit.

JOURNALIST: Does WA do it better?

MADELEINE KING: Of course WA does it better. I mean, we all know that, but we all work together. I’ve been to Mackay, Gladstone, Townsville, many places in Queensland since I got elected, since I was made minister as well. And so I will be there next week.

JOURNALIST: Can I clarify the industry has a couple of months to show you there won’t be a shortfall? And what exactly is your message to industry? What will you be looking for from them?

MADELEINE KING: Just on the timing, so this is we’re talking about the existing ADGSM, because of the impact of it not having been renewed I’ll have to wait a couple of weeks for that trigger so to speak to be available. And then there’ll be a notice of intention that will be issued because of the evidence presented in the ACCC report. And then there is a period of a couple of months where not just the gas companies but everyone gets to provide information to me to then make an assessment as to whether to take the next step, which is going further with the mechanism. So it’s quite complicated. It should be complicated, quite frankly, because these are serious export controls we’re talking about.

JOURNALIST: [Indistinct] October, is that a final deadline?

MADELEINE KING: It’s not a final deadline, but it will be in October is my anticipation.

I have to go, I’m afraid. I hope that was okay for everyone. Thank you very much.