Gas shortage in Australia drives ship imports

13 February 2019

The current state of the Australian domestic gas market is driving an unprecedented number of regasification projects across Australia.

The lack of a West to East gas pipeline and the long term export commitments of our domestic producers in both Western Australia and Queensland have left those residing in New South Wales, Victoria and South Australia exposed to the real risk of domestic gas shortage.

The looming problem drove the Federal Government in 2017 to introduce the Australian Domestic Gas Security Mechanism (ADGSM), under which the Federal Minister for Resources can determine whether export restrictions should be imposed to avoid any potential shortfall in meeting domestic demand for gas.

In January 2019 Jemena’s $800 million Northern Gas Pipeline was placed into service connecting the Northern Territory pipelines with the East Coast network. This will assist but not solve the problem.

ACCC Chairman Rod Sims opines: “Gas production costs are increasing and gas prices in the east coast market are now shaped by international LNG prices, meaning that domestic prices are unlikely to return to historic levels.” and “To improve market conditions, the east coast gas market requires a greater level and diversity of supply, a more efficient transportation network, and greater transparency. To lower prices in the southern states, lower-cost gas must be produced in the southern states”.

Absent very significant pipeline investment, the solution for Australia is increased importation and regasification of LNG. This has driven FSRU projects by AGL at Crib Point in Victoria, AIE at Port Kembla in New South Wales and most recently a proposal by EPIK for Newcastle.

Each of these projects requires the importation of a Floating Storage Regasification Unit (FSRU) on long term time charter crewed by foreign crews. This gives rise to a number of local regulatory issues that vessel owners and charterers need to bear in mind. Examples include:

  • Vessel importation and tax implications;
  • Shipping registration and cabotage;
  • Corporate structure and incorporation in Australia;
  • Gas market participation, licencing and regulation;
  • Employment of crew, work health and safety, industrial relations and visa requirements;
  • Planning and Environmental approvals and licences;
  • AMSA Port State Control;
  • Port Authority approvals and conditions; and
  • Biosecurity, ballast water and environmental regulation.

The shipping and trade team at HWL Ebsworth Lawyers have a long history of advising international shipowners, operators and commodities traders with their Australian trade. We have advised in relation to a number of FSRU and other projects involving the importation of ships into Australian waters. We are supported by our national network of offices and experts in employment, planning, environment, corporate, tax and energy regulation.

If you have any questions regarding LNG projects in Australia we would be happy to assist.

This article was written by Chris Sacré, Special Counsel.

Chris Sacré

P: +61 2 9334 8564


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