Gas giants demand Santos not be given ‘leave pass’ from reservation

Gas giants in Australia are intensifying their push against what they perceive as preferential treatment for Santos, a major player in the country's liquefied natural gas (LNG) sector. As tensions rise over the impending rollout of Labor’s national gas reservation scheme, Australia Pacific LNG (APLNG) has taken a firm stance, urging the government to ensure that the policy applies uniformly across all players in the industry. This comes amid growing concerns among key stakeholders about potential imbalances in how the scheme might affect different companies and regions.

APLNG, a significant player in the eastern Australian gas production landscape, has submitted a detailed proposal to the federal government outlining its opposition to granting exceptions—referred to colloquially as “leave passes”—to Santos' GLNG operations. According to internal documents obtained by media outlets, APLNG argues that such exemptions would undermine the integrity of the reservation framework. The company emphasizes that the policy must be implemented consistently across all three major east coast exporters to maintain fairness and protect the interests of both investors and trade partners.

The proposed reservation scheme aims to allocate 20 percent of Australia’s LNG exports starting in 2027 toward domestic use. This initiative seeks to address concerns about energy security and affordability within Australia, particularly as the nation faces increasing pressure to balance its reliance on gas exports with the need for stable local supplies. However, the plan has drawn criticism from several quarters, especially from other east coast gas producers who fear it could deter future investments in new supply sources and potentially strain relationships with key Asian trading partners.

Despite the absence of a formal carve-out for Santos’ GLNG under the current draft of the reservation scheme, there are indications that the government’s ministerial powers could allow for alternative arrangements benefiting Santos. These could involve temporary exemptions from the scheme or delaying the company’s contribution until the late 2030s, coinciding with the expiration of many of its existing LNG export contracts. APLNG has explicitly rejected these possibilities, stating that any deviation from uniform application of the rules would compromise the effectiveness of the reservation policy.

According to APLNG’s submission, the company remains fully committed to reserving gas for domestic consumption. It highlights that most of Queensland’s gas is already tied up in long-term export agreements, primarily directed towards Asian markets. APLNG and the Shell-backed QCLNG joint venture near Gladstone collectively contribute approximately 40 percent of the east coast’s domestic gas supply. In contrast, Santos-backed GLNG operates as a net withdrawer of domestic gas, sourcing additional volumes to fulfill its international commitments.

Energy policy experts have weighed in on the debate, emphasizing the necessity of consistent supply contributions from all participants in the reservation scheme. Grattan Institute analyst Tony Wood noted that even though Santos GLNG may lack surplus gas from its Queensland ventures, the company has viable options to secure necessary supplies from other sources. He stressed that rather than offering variations or special considerations, the policy should enforce strict obligations on all entities, allowing them flexibility in sourcing gas from anywhere in the market.

The Queensland government has also voiced its concerns regarding the implementation of the reservation scheme, suggesting that it should be postponed. Officials argue that this delay would provide more time to explore alternatives, such as sourcing gas from other operators or entering into new development agreements with firms like Beach Energy. Similarly, representatives from the Australian Workers’ Union have expressed strong opposition to any form of carve-outs for exporters, insisting that a single, unified set of rules must govern the entire sector to prevent exploitation and ensure equitable outcomes for all stakeholders.