Key figures in the gas supply industry met Prime Minister Malcolm Turnbull on Wednesday to discuss measures aimed at heading off supply shortages and surging prices resulting from the start-up of a series of gas export projects in Queensland. The government called the meeting following a spike in the domestic gas price and rising complaints that large gas users are unable to obtain gas supply contracts and a lack of gas supplies for a power station in South Australia that triggered a recent blackout.

The suppliers will guarantee to meet peak demand periods for gas, such as during heatwaves and bringing more gas to market as quickly as possible. And the Australian Competition and Consumer Commission and economist Dr Mike Vertigan??? are to advise the government and the industry on options to help lift transparency and trading within the domestic market.

There was also discussion of a potential monitoring role for the Australian Competition and Consumer Commission, although nothing definite was decided at the meeting.

Dr Vertigan is reviewing a recommendations put forward by the ACCC to tackle the difficulty in clarifying domestic traded prices of gas and also access to pipeline capacity and associated issues such as the extreme cost of transporting gas to end-users. The high pipeline costs is one factor behind one large user - AGL - working on plans to import gas, since the cost of transporting gas from foreign sources into Australia is significantly cheaper than piping gas into parts of the domestic market.

Shell Australia chairman Andrew Smith said the industry understood community acceptance of a gas export industry depended on a reliable supply of gas into the domestic market.

"We understand that if we want a long-term export industry we need to make sure Australians have gas available at competitive prices," he said.

Shell's QGC project had signed a number of domestic gas contracts recently, including with AGL and Alinta, he said, which will help maintain supply across eastern Australia during winter, while the project had already reduced export to supply additional gas to the domestic market.

Origin chief executive Frank Calabria described the discussion as "collaborative" while also raising issues that have hampered the industry's development.

"For a number of years, Origin has been vocal about opportunities and challenges facing the sector and we look forward to coordinated action between industry and federal and state governments to address the current issues."

Santos confirmed that it, too, would seek to free up gas to supply the domestic market, without giving details.
"At the core of our strategy is a commitment to the east coast domestic market," Santos chief executive Kevin Gallagher said. "We are committed to working across all of our joint ventures to free up gas as well as continue to identify and develop new resources for the domestic market."

During the meeting, the gas producers pointed to state government controls which had hampered some exploration and production.

"If we want to see a competitive price for gas we must develop additional local supply - particularly in Victoria," Shell's chairman, Mr Smith warned. "If not, every Victorian household and business will pay more for gas than they need to. In the state that depends most on gas, this means less jobs, less investment and a higher cost of living."

His comments came as the Prime Minister singled out Victoria for criticism in shutting down much of its exploration industry, pointing to that state's "enormous gas resource" which has been locked up as coal power stations such as Hazelwood are to close.

"There won't be a repeat of a situation where a gas-peaking power plant is called on by the regulator to produce electricity during a heatwave, and there's no gas available," Mr Turnbull said following the meeting. "That won't happen again, consistent with the guarantees we've been given."

Earlier this week, the ACCC chairman, Rod Sims, warned that the supply issues could force manufacturers to close down. He pointed to the surge in east coast gas exports following the development of a series of gas export projects in Queensland for the difficulties.

These projects have resulted in low-priced east coast gas prices rising to international price levels, so that the historical price of $3-4 a gigajoule has risen recently in some cases to more than $20.