In short:
Gas market players say the federal government's draft gas reservation scheme has been weakened by loopholes.
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scheme → say → loopholes
They argue that changes to the policy favour the Santos-led GLNG venture, which has been blamed for rising prices on the east coast.
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which → argue → coast
The government is expected to release legislation for the scheme in the coming weeks.
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government → expect → weeks
A giant LNG plant blamed by critics for driving up east coast gas prices could largely or totally escape a federal scheme designed to protect local buyers, observers have warned.
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observers → blame → buyers
The Albanese government last month released a draft plan to force gas exporters to set aside up to 20 per cent of their production for the domestic market in a bid to force prices lower.
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government → release → prices
But analysts and industry players say the draft is full of loopholes that will allow some exporters to reduce or even eliminate their exposure.
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exporters → say → exposure
They point to the Gladstone LNG project, a plant on Curtis Island in Queensland that is operated by Adelaide-based Santos, as the exporter most likely to benefit.
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that → point → exporter
An investigation by the ABC revealed GLNG had sucked up and exported the equivalent of 20 per cent of eastern Australia's domestic gas demand over the past 10 years.
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GLNG → reveal → years
This was because the venture built an LNG plant with a capacity of 7.8 million tonnes a year despite not having nearly enough gas of its own to fill it.
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venture → build → it
By contrast, the other two LNG projects in Queensland — run by global super-major Shell and Australian company Origin along with US firm ConocoPhillips — had overwhelmingly been supplying the local market in net terms.
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projects → run → terms
Paul Farrow, the national secretary of the Australian Workers Union, said "Santos-sized loopholes" threatened to turn the government's reservation plans into a joke.
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loopholes → say → joke
Mr Farrow said that, compared with earlier iterations of the plan, the draft had been watered down in significant ways that appeared to favour GLNG above all others.
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that → say → others
"Australian industry and Australian consumers deserve to derive an advantage from Australia's gas because it's our sovereign wealth," Mr Farrow said.
"The government is so close to getting it right.
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it → deserve → gas
But the exposure draft, as it stands, contains a bunch of Santos-sized loopholes.
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it → stand → loopholes
Policy 'watered down'
Under the draft policy, the Australian Energy Regulator would be able to reduce an exporter's supply obligation below 20 per cent, while the minister could cut it to zero.
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minister → water → zero
But critics say a raft of other provisions in the bill could enable Santos and its GLNG partners to slip the net themselves.
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raft → say → net
They say the draft, unlike earlier iterations, effectively allows GLNG to count contract extensions as "existing contracts" that are exempt from consideration.
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that → say → consideration
Crucially, this would allow GLNG to extend for five years from 2030 a supply agreement with South Korea's KOGAS.
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GLNG → allow → KOGAS
Observers also say the draft will give rise to "take-or-pay" deals that allow Santos to generate paper sales to the domestic market without actually supplying any gas.
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Santos → say → gas
And they argue the government has given too much ground to Santos over questions about whether the company can "reasonably" find enough gas without breaking export contracts.
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company → argue → contracts
Mr Farrow said the provision should require Santos to explore all practical options such as buying gas from other providers in the local market, substituting LNG cargoes from its international operations or using flexibility in its contracts to reduce overseas sales.
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provision → say → sales
Instead, he said the draft appeared to allow Santos itself to set those terms, which he argued the company would do so however it liked.
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it → say → terms
"If a massive project like GLNG wants to claim that it simply doesn't have enough gas to share with the Australian market, it should have to prove it's actually explored all practical options to get hold of that gas," Mr Farrow said.
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Farrow → want → gas
"These options might incur a small cost for Santos' shareholders.
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options → incur → shareholders
I don't see why the average Australian should be the fall guy instead."
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Australian → see → ?
As well as these provisions, Mr Farrow said the draft contained other clauses that would allow GLNG off the hook.
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that → say → hook
Among them was a so-called "additional gas" test.
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test → call → them
While Mr Farrow said the test was theoretically supposed to encourage new production and increase supplies, in reality he said it was likely to be gamed.
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it → say → reality
He said an exporter might simply be able to buy a company supplying the local market, count their production as "additional" and even export volumes that would have stayed in Australia.
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that → say → Australia
On top of this, the AWU and others have also noted the draft does not carry forward reductions from a producer to future years, meaning deficits may be extinguished.
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deficits → note → years
An industry divided
Santos was contacted for comment, as was federal Resources Minister Madeleine King.
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King → divide → comment
The widening gap between the supplies taken out of the domestic market by GLNG and those provided by the other two Queensland producers has led to growing tensions that have spilled into the open.
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that → widen → open
Last month, Dan Clark from Origin's and ConocoPhillips' Australia Pacific LNG project took the rare step of publicly, albeit obliquely, singling out the GLNG venture.
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Clark → take → venture
In an opinion piece, Mr Clark said exporters taking gas out of the local market should "first have to contribute at home with no carve-outs, leave passes or exemptions".
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exporters → say → outs
He also noted domestic prices had fallen after "one exporter", widely interpreted as GLNG, "chose to reduce domestic purchases".
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exporter → note → purchases
Santos chief executive Kevin Gallagher, in turn, hit out at his rivals.
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Gallagher → hit → rivals
"It would appear that I'm living rent-free in a few of the heads of our competitors around Gladstone at this point in time," Mr Gallagher said last month.
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Gallagher → appear → time
Adding to the drama, China has taken the step of voicing its concerns about the changes that are being made to the reservation plan.
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that → add → plan
The Australian Embassy of the People's Republic of China, in a submission to the government, called on Canberra to ensure its interests were treated fairly compared with those of other countries.
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interests → call → countries
Through its state-owned oil and gas producers Sinopec and CNOOC, China is a major owner — and customer — of both Asia Pacific LNG (APLNG) and Queensland Curtis LNG (QCLNG).
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China → own → LNG
…and 8 more, not listed.
The Aporia