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Australia gas majors to avert local shortage

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Reuters are reporting that Australia's top gas producers, led by ExxonMobil Corp and Royal Dutch Shell, have agreed to boost supply to the country's domestic market to help avert an energy shortage.

The move comes following crisis talks with Prime Minister Malcolm Turnbull.

Australia is on track to become the world's largest exporter of LNG, yet its energy market operator has warned of a domestic gas crunch from 2019 that could trigger industry supply cuts and broad power outages.

The South Australian government has outlined plans to spend AUS$510 million (US$385 million) to keep the lights on, including AUS$150 million to encourage the development of 100 MW of battery storage.

Australian manufacturers have long complained of tight gas supplies and soaring prices as producers have focused on supplying gas to LNG plants that have locked in 20-year export contracts. Three LNG plants have opened in the country over the past two years, which has tripled gas demand and sent gas prices rocketing from around AUS$6/GJ to as much as AUS$22/GJ.

Diverting gas from LNG plants into the domestic market would be the easiest short-term solution, as two of the three LNG plants in Queensland - Shell's QCLNG and Origin and ConocoPhillips' Australia Pacific LNG (APLNG) – have some capacity that is not locked into export contracts.

Turnbull said both QCLNG and APLNG had committed to being net suppliers to the domestic market, while Santos' Gladstone LNG, which is short of gas, had taken the request on notice.

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