Why insiders say Australian gas got so expensive | The Business | ABC NEWS

Australia's gas industry, a national titan that's one of the country's biggest exporters, has been in the headlines for years but for the wrong reasons. Now, with a federal gas reservation scheme on the horizon, the industry's united front is splintering, revealing deep frustrations with one player - Santos. Saul Kavonic, head of energy research at MST Financial says the tensions stem from the once-in-a-generation investment boom that opened up the country's east coast gas market to exports. GLNG, or Gladstone LNG, is one of three giant gas export plants built on Curtis Island in Queensland last decade. It is operated by Santos and counts South Korea's KOGAS and Malaysia's PETRONAS among its investors. Saul Kavonic says Santos was alone in building its plant without having the gas to fill it and needed to buy gas out of the domestic market just to meet its contracts. Grattan Institute analysis of ACCC data shows GLNG is the only Queensland exporter to have consistently taken more gas from the domestic market than it provides. It's all a far cry from the way Santos pitched the project to governments and the public. At the time, Santos stressed GLNG would have "no direct implications for domestic gas prices" and that it would "not divert gas from local markets to export markets". The company told regulators the development was "therefore unlikely to contribute to a future shortage of gas in the domestic market". But even as Santos was assuring the public on one hand, it was telling shareholders a very different story. Investor presentations from 2011 show Santos knew opening Australia's eastern market to exports would lead to "permanent … upward pressure on gas prices". As one of Australia's biggest oil and gas operators, it said this exposure would transform Santos' fortunes and be a commercial boon.

Former company insiders say Santos always knew it lacked the gas reserves to fully supply the current plant. While one former minister acknowledges GLNG should never have been approved without domestic supply obligations. Federal Resources Minister Madeleine King said the best time to have introduced a domestic reservation policy on the east coast was before that export industry commenced. But she declined to be drawn on the historic decisions made by Santos and GLNG. She says the government is not interested in pointing the "finger of blame" at any one player and that "gas exploration is complex".

The former boss of Woodside, Peter Coleman ruffled feathers in 2017 when he warned the industry would risk its social licence if it allowed shortages to emerge and prices to rocket. He said "what we've seen over the last 10 years is now those words play out ...The companies have a license or a right to develop it, but at the end of the day, the resource itself is owned by the people and we have an obligation to ensure that endowment is used in the best way possible."

Paul Farrow, the national secretary of the Australian Workers Union, says the company knew all along it did not have sufficient gas resources to cover its export commitments. He says the consequences of that decision have been disastrous for gas users such as manufacturers, many of whom employ his members.

Santos said it had historically contributed the most of any exporter during winter and neither GLNG nor the Queensland LNG industry had caused gas shortages or price spikes. A spokesperson said GLNG does not intend to contract new gas supply from the domestic market to meet any LNG shortfalls from this year onwards.

With a draft reservation plan due within weeks, the federal government say it's determined to secure the equivalent of 20 per cent of LNG exports for the local market and won't jeopardies exporters' contracts to do it. Saul Kavonic says Santos will use its formidable lobbying skills to escape – or kill – any reservation policy on the grounds of sovereign risk. But he argues the original investors knew the risks all along and said shaky industry support for the scheme will crumble unless the government includes GLNG.
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Read more here: https://www.abc.net.au/news/2026-09-08/santos-accused-as-at-fault-for-domestic-gas-crisis/107101388

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