Future Gas Strategy – Transitioning towards net zero

On 9 May 2024, the Federal Government released the Future Gas Strategy, which will guide the Australian Government’s policymaking to support Australia’s economic transition to net zero. The strategy draws on the Future Gas Strategy Analytical Report, which provides an in-depth analysis of data about gas supply, consumption and emission and is shaped by public consultation.

This policy outlines the government’s position that gas will remain an important source of energy through to 2050 and beyond. The Future Gas Strategy also foreshadows the critical role gas is anticipated to play as Australia transitions towards renewable energy and reduces its gas emissions.

The Future Gas Strategy provides a high-level framework of the Federal Government’s ambitions for the gas industry, including as an enabler of net zero. This policy is largely a statement of intent. The policy (due to its nature) does not contain much detail on how the principles will actually be achieved (other than certain ‘immediate actions’) or include much detail regarding any future amendments to legislation.

The strategy acknowledges that the east coast market faces challenges arising from a lack of competition, depleting resources and increasing regulatory compliance and extraction costs. While the Federal Government proposes to release offshore acreage and increase pressure on titleholders to develop reserves, its strategy remains silent as to how the Federal Government intends to streamline approval processes, alleviate barriers to investment (ie, government market intervention and price capping), and encourage States and Territories to do the same.

While the Future Gas Strategy was likely designed to provide more certainty in relation to the Federal Government’s position on gas, the policy is not unanimously supported within the Labour party and will no doubt come under fire from other political parties (whose support is required to pass legislation). As such, to achieve this strategy the Federal Government will need to tread a tightrope between achieving bipartisan support and incentivising gas production.  

Key Principles

The strategy centres on six enduring principles that will underpin future government policies and actions.

1. Australia is committed to supporting global emissions reductions to reduce the impacts of climate change and will reach net zero emissions by 2050. 
2. Gas must remain affordable for Australian users throughout the transition to net zero. 
3. New sources of gas supply are needed to meet demand during the economy-wide transition. 
4. Reliable gas supply will gradually and inevitably support a shift towards higher-value and non-substitutable gas uses. Households will continue to have a choice over how their energy needs are met.
5. Gas and electricity markets must adapt to remain fit for purpose throughout the energy transformation.
6. Australia is, and will remain, a reliable trading partner for energy, including LNG and low emission gases.

Objectives

The strategy’s objectives are to:   

• support decarbonisation of the Australian economy;
• safeguard energy security and affordability;
• entrench Australia’s reputation as an attractive trade and investment destination; and
• help Australia’s trade partners on their own paths to net zero.

Limited Commonwealth Role

The levers that the Federal Government is able to pull to achieve the objectives of the strategy are somewhat limited. While the Federal Government is responsible for offshore gas fields in Commonwealth waters and certain environmental approvals (amongst other matters), the cooperation of the States and Territories is critical to ensure that onshore acreage is released and commercialised. It is anticipated that future production on the east coast is likely to largely come from the north (Queensland and Northern Territory) due to the more “pro-development” policies and untapped reserves.

The Australian Government has previously entered into the Australian East Coast Domestic Gas Supply Heads of Agreement (HOA) with east coast LNG exporters and the Australian Domestic Gas Security Mechanism (ADGSM) to ensure there is sufficient gas supply to meet the forecast needs of energy users in Australia. In line with its long-term strategy, the Federal Government flags that the HOA and ADGSM will be reviewed and updated as needed.

Immediate actions

Arising from the six principles, the Federal Government proposes to:

1. update the Commonwealth offshore retention lease policies to encourage more timely development of gas discoveries;
   
   While it does not provide specifics, the Federal Government notes that it is considering a firmer ‘use it or lose it’ policy - whereby, titleholders will need to develop reserves, at the risk of otherwise losing their retention licences (beyond the current requirements to do so).
   
   
2. work with regulators and industry to reduce and, where possible, eliminate gas venting and flaring, unless required for safety purposes;
   
   
3. a new Transboundary Carbon Capture and Storage (CCS) Program which will provide options for energy security and carbon management solutions for Australia’s regional partners; and
   
   The Australian Government has committed $12 million over 3 years to provide regulatory and administrative certainty for offshore CCS projects.
   
   The Australian Government will continue to organise and attract investment in Australia’s growing CCS industry, through:
   1. releasing offshore acreage for greenhouse gas storage;
   2. reviewing the offshore regulatory regime;
   3. encouraging innovation through the $15 million Carbon Capture Technologies Program;
   4. encouraging collaboration across industries;
   5. growing Australia’s clean energy exports; and
   6. connecting Australia to new clean energy supply chains through the Hydrogen Headstart and Regional Hydrogen Hubs programs.
4. clarify consultation requirements for offshore petroleum and greenhouse gas storage activities as part of a broader three year review of the offshore environmental management regime.

In January 2024, the Federal Government released a discussion paper on the consultation requirements for offshore petroleum and greenhouse gas storage activities. The Federal Government now seeks to clarify these requirements to ensure the needs of stakeholders are appropriately considered.

If you have any questions about the relevance of the Future Gas Strategy, please contact us.