Australia Gets Commitment From Gas Producers to Increase Domestic Supply

   By Robb M. Stewart and Rob Taylor

Australia has secured a commitment from natural-gas producers to increase supplies along the eastern seaboard to fend off a looming shortfall and help rein in power prices, Prime Minister Malcolm Turnbull said Wednesday.

The pledge from international and local energy companies, including Royal Dutch Shell PLC (RDSA) and Santos Ltd. (STO.AU), follows a meeting with industry executives called by the prime minister, who had earlier said companies risked losing their "social license" with the public to operate if there wasn't sufficient gas for households and industry even as Australia positions itself to become the leading exporter of liquefied natural gas.

"It is utterly untenable, unacceptable, for us to be in a position where domestic gas consumers, whether it is generators, whether it's businesses and industry, or whether it's families, cannot have access to affordable gas," Mr. Turnbull told reporters.

He said producers gave a guarantee to ensure gas is available to meet peak demand periods such as heatwaves, and had agreed to increase supplies to the eastern market as soon as possible, which he expected would put pressure on prices. There was no discussion of just how much additional gas was anticipated.

Last week, the Australian Energy Market Operator projected a shortfall in gas-power electricity generation in the southeast states as soon as next summer if no action is taken. Manufacturers have complained of rising power costs and difficulties lining up long-term supply contracts, even as exports of gas to Asia continue to ramp up.

Mr. Turnbull said the government wouldn't hesitate to intervene in the market and regulate domestic supply if the industry wasn't able to guarantee adequate supply, possibly establishing a legislated reservation of supply for local use.

"All of the powers that we have under the constitution we reserve to be able to use and when the national interest demands it," he said. "What we've sought from the industry is the commitment to ensure that the domestic market has the gas supplies it needs."

Write to Robb M. Stewart at robb.stewart@wsj.com and Rob Taylor at rob.taylor@wsj.com

(END) Dow Jones Newswires

March 15, 2017 02:49 ET (06:49 GMT)

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