Japan has urged Australia to consider its trading partners after gas producers warned they would halt investment if long-term price caps proposed by the government were introduced.
The Asian nation gets 40% of its liquefied natural gas (LNG) and 60% of its coal from Australia. Canberra had previously assured Tokyo that any market intervention would not affect supply to the country, Japan’s Embassy in Australia said in a written response to questions. It encouraged the government to honour that promise.
Australia said last week it would cap domestic gas prices at A$12 ($8.2) a gigajoule and coal prices at A$125 a ton for 12 months, in an effort to shield businesses and households from soaring global prices. It stressed that the long-term contracts under which most LNG is exported would be unaffected, but also flagged more permanent local price controls and powers to forcefully redirect supply to the domestic market.
It was the potential longer-term measures in particular that spooked gas producers. A lobby group representing majors including Shell Plc, Chevron Corp., Exxon Mobil Corp. and Woodside Energy Group Ltd. warned the move would “fundamentally dismantle” Australia’s A$80 billion a year LNG industry.
The center-left government, which came into power in May, plans to legislate the short-term price caps this week, but will consult industry on the longer-term intervention before introducing laws.
Tokyo and Canberra had “continuously been communicating on these issues for quite some time” and Australia had given assurances that it would remain a “reliable and trusted supplier of energy and resources to Japan,” the embassy said.
“We trust that these considerations will be duly reflected in any steps to be taken by the Australian government, in close consultation with relevant stakeholders including industries,” it said.
Japan’s confidence contrasts with the gas sector, which has been lobbying aggressively against the proposed laws.
“This is going to have a chilling effect on future investment in supply, and it’s that new investment in supply that is actually the key to bringing down prices for Australian households and Australian manufacturing,” Samantha McCulloch, chief executive officer of the Australian Petroleum Production and Exploration Association, said at a press briefing on Monday.
The government will hold talks with the three East Coast LNG exporters on Thursday, Resources Minister Madeleine King said Wednesday.
“Gas absolutely has a future in Australia,” she said in an interview with the Australian Broadcasting Corp. “Australian gas is very important to regional energy security, and we will continue to be that reliable supplier of energy to our regional neighbours.”
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