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Santos steps up effort to avert LNG export curb

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Reuters are reporting that Santos Ltd is racing to boost gas supply to Australia’s eastern market to fend off government limits on exports of LNG in 2018, with its latest deal involving local gas swaps.

Australia is on track to become the world’s biggest LNG exporter by 2019, which has tripled demand for gas on Australia’s east coast, straining supplies in the domestic market and driving up gas and power prices.

To help ease soaring energy prices, the government has put in place a controversial measure to curb LNG exports from the east coast if it deems there is likely to be a shortfall of domestic gas supply in any year.

The Australian Energy Market Operator (AEMO) is due to deliver its latest forecast on gas adequacy to the federal government on 1 September.

That report will be the basis for the government to decide whether to declare a gas shortfall for 2018 and trigger export curbs.

Santos’ Gladstone LNG plant is the most vulnerable to the export restrictions as the rules target any east coast LNG project that is taking gas from the domestic market to help meet its export contracts.

To boost local supply, Santos on 30 August announced a deal involving a gas swap that could send an extra 18 petajoules to the southeastern states.

The deal allows the undisclosed company to deliver gas without having to enter separate pipeline transport agreements. Access to pipeline capacity has been seen as a key obstacle to moving gas from north to south.

Santos also earlier announced a deal to supply 15 PJ of gas to a power plant in South Australia from January next year.

Gas producers have warned that the export curbs raise sovereign risk in Australia and could backfire.

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