Desperate times call for desperate measures.
Among the many crises facing the nation in recent years, the east coast gas shortage has been among the most divisive from a political, economic and social perspective.
No-one has been spared.
It has sent electricity prices on the national market surging, added significantly to the inflation spiral that sent interest rates into orbit, caused an exodus of energy intensive businesses and prompted a range of extreme responses from three prime ministers.
Malcolm Turnbull, Scott Morrison and Anthony Albanese all were forced to intervene. None of it worked.
There has even been an import terminal built at Port Kembla, just south of Sydney, which, for a nation that is one of the world's biggest exporters, appears inconceivable.
But a new report, penned by a former director of the Australian Competition and Consumer Commission's Gas Inquiry, recommends a solution that appears to have an elegant simplicity.
Why don't we just limit exports?
Josh Runciman, now with the Institute for Energy Economics and Financial Analysis, argues the long-held position that Australia should just add more gas supply needs a rethink because it simply hasn't worked.
"It is now clear that increasing gas production will not solve the looming supply gap, and that governments and energy agencies, including the ACCC, should give further consideration to other measures to address potential supply gaps," he says.
Despite a large increase in east coast gas production during the past decade, Mr Runciman argues the three massive export terminals on Curtis Island off Gladstone on the Queensland coast, have accounted for all of it and more, to the point that they now drain existing domestic supply.
One idea, he suggests, "would involve diverting some LNG exports into the domestic market".
Putting foreign buyers above locals
In the past, suggestions of this nature have been met with alarm.
Most producers, with supply contracts locked in with offshore clients, mostly in Asia, have fought against any measures that could force them to break their contracts, increasing what they describe as "Sovereign Risk".
According to Mr Runciman, however, that is no longer the case.
"In recent years, Australian LNG exporters have continued to export gas beyond that required to meet their long-term contracts into LNG spot markets to take advantage of high prices," he says.
According to him, the exporters find it more lucrative and simpler from an operational viewpoint to simply load up a ship and sell into global energy markets at the going rate rather than be tied down to a year-long supply contract on the domestic market.
Given exports account for 80 per cent of Australia's gas sales, he argues that even a small diversion of uncontracted export gas would add significantly to the domestic market, which would secure domestic supplies and ease prices.
Draining the system
Gas prices, while lower than their 2022/23 peak, are currently sitting at about $12 per gigajoule. That is treble the price from the days before east coast exports created shortfalls on the domestic market.
The price spikes began after all three export groups built separate LNG processing plants adjacent to one another on Curtis Island and then struggled to maintain enough throughout to make them viable. The Santos-led venture was the worst performer.
Gas that previously had been supplied to domestic users was then diverted to export markets, creating perennial shortfalls.
As a result, households which once relied upon gas as a source of energy have switched to electricity, decreasing demand. But, as Mr Runciman explains, the drop in local demand has been overtaken by increased export shipments.
Industrial users, too, have been severely impacted with many choosing to relocate to other markets that offer cheaper gas or have failed, further hollowing out Australia's manufacturing sector, a process that began when the mining boom sent the Australian dollar well above parity around 2010.
There appears no end in sight to the exporter stranglehold on domestic users.
"Queensland LNG exporters have collectively shifted from being net contributors of gas into the domestic market to net withdrawers, thereby worsening the supply/demand outlook," he says.
"While their net withdrawal is relatively small — estimated at 6 petajoules (PJ) in 2023 — the ACCC expects this will increase in coming years."
Transition to nowhere
The surge in domestic gas prices has created chaos on electricity markets and stymied the uptake of renewable energy.
Gas is a crucial element in electricity generation as, unlike coal generators, it can be quickly deployed to fire up turbines in times of power shortages.
As the fuel of last resort, therefore, it helps set electricity prices.
In the aftermath of Vladimir Putin's invasion of Ukraine in 2022, global energy prices soared and the east coast gas exporters saw bulging revenues.
But that pushed up the price of domestic electricity generation, which was a key component in the inflation outbreak, and the subsequent 13 interest rate hikes foisted upon the public by the Reserve Bank.
It also was seen as the transition fuel, to back up renewables such as wind and solar during periods of adverse weather until energy storage technology was improved.
Cheaper gas would make renewable energy even cheaper.
A looming glut
There may be some relief in sight.
With the US likely to significantly lift exports, global prices may trend lower in the longer term.
In the meantime, Japanese users appear to have ordered too much and have been in the market, on-selling some of their imports which, oddly, may result in Australian gas finding its way back home after an extended and unnecessary trip around the Pacific.
"By redirecting this gas for domestic use, Australia has an opportunity to resolve the east coast supply issue with minimal impact on LNG exporters, thereby ensuring we retain gas-intensive manufacturing jobs and skills until commercially viable alternatives are available," Mr Runciman says.
He also argues that the import terminal could be used to direct west coast gas to the east, a much cheaper option than building a pipeline across the country.
An outlandish idea that could be put to good use.
