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Bold gas action offers hope on energy crisis

"The priority to be given to the domestic gas market over gas exports announced by the Turnbull Government overnight is an appropriate and welcome response to an extraordinary crisis," Australian Industry Group Chief Executive Innes Willox said today.

"Recently Ai Group put detailed proposals to both sides of politics for responsible exercise of the Commonwealth's power over exports in order to motivate exporters to secure domestic supply. And we have made clear the costs that energy users are facing, and the consequences if nothing is done.

"The Government has listened and followed through with decisive action. 

"The export approval process announced today gives the gas industry maximum flexibility to make commercial agreements to fill the hole in domestic supply due to the over-commitment to exports. And the firm prospect of an export ban should ensure that they take this opportunity. 

"We are hopeful that the Government's intervention will see the gas supply and price crisis ease in the near future – and that these steps will also take pressure off electricity prices. 

"However, major energy challenges will remain. All states need to work with their communities, gas users and gas producers to ensure that enough gas can be produced to meet our needs. 

"If gas prices do fall to export parity they will still be far above historic levels, and gas users will need to become more efficient or switch fuels to remain competitive. Our electricity system badly needs the blueprint for reform and flexibility being developed by the Finkel Review. And the absence of bipartisan, efficient and scalable climate policy remains a stumbling block to the energy investment we need.

"But it is heartening that both major political parties are now committed through various measures to ensure domestic gas supply to ease pressure on prices. 

"Ai Group will fully participate in the process to finalise the export control regulations ahead of their implementation on 1 July. We will also continue to encourage all States to open up to responsible gas development under science-based regulation. In particular, effective moratoriums on gas development in Victoria, NSW and the Northern Territory should be lifted immediately or state and territory governments will continue to be responsible for damaging cost pressures on their own communities.

"The massive expansion of gas exports from Eastern Australia has led to a shortage, even as we produce more gas than ever before. As Ai Group's recent Energy shock report demonstrated, this shortage is sending prices far above parity with overseas markets.  

"Gas users across swathes of manufacturing are facing ruinous price increases. And the cost of gas is a big driver of the ongoing surge in electricity prices because of the critical role of gas-fired electricity generators. 

"Every day we receive calls from businesses dismayed by energy prices two to four times higher than their previous contracts. If the current situation were to be allowed to continue, jobs, investment and Australia's economic diversity would be threatened. 

"As the Federal Government has now clearly seen, the only way to relieve the gas crisis in the near term is for gas exporters to redirect gas into the domestic market, preferably through voluntary arrangements and gas swaps.  

"Ai Group has long called for a national interest assessment of gas export arrangements to ensure we do not repeat the mistakes that have led to this point. 

"Gas has been and will continue to be a key issue for Ai Group and our members," Mr Willox said.

Media Enquiries: Tony Melville – 0419 190 347