PM calls energy crisis talks amid gas shortage blackout warnings

Malcolm Turnbull has called urgent crisis talks with Australia's east coast gas companies after the energy market regulator warned of looming shortages that could lead to widespread blackouts as early as next year.

Describing the potential shortfall as "very concerning", the Prime Minister also called on state governments to loosen restrictions on onshore gas exploration and development in a bid to avert the energy emergency.

His government is also considering some sort of domestic reservation policy to boost gas supplies but is grappling with how to implement it, fearing it could act as a disincentive to investment.

The Australian Energy Market Operator has also warned that power costs will continue to rise even if new gas supplies come online, putting the "financial viability of some commercial and industrial customers" under threat.

In its latest report on Thursday, AEMO said that without a swift response, New South Wales and South Australia could face supply risks as early as the summer of 2018-19, Victoria in 2020-21 and Queensland between 2030 and 2036.

With energy demand rising and gas production from existing fields in decline, the market needs new sources of gas or the rapid implementation of new non-gas electricity generation to avoid cuts, the regulator said.

"We can either redirect some of the LNG from the international markets into the domestic market, assuming that the price allows that to happen, we can increase production from the existing fields, we can explore and develop new fields or we can have investment in the pipelines," said AEMO chief operating officer Mike Cleary.

???The AEMO report said new gas supplies might help with reliability and security but, due to rising production costs, would not bring price relief.

Mr Turnbull's meeting with gas company CEOs - expected to include bosses from Shell, Exxon Mobil, Santos, BHP, Origin and Arrow Energy - is expected to take place in Canberra next Wednesday.

"What Australians want is a result. They want energy security, energy that is affordable, and we need to meet what we agreed to in Paris," he said.

The oil and gas industry's peak body, the Australian Petroleum Production & Exploration Association, said the shortages were the consequence of many years of policy failure by state governments, particularly in Victoria and NSW.

APPEA chief executive Malcolm Roberts said politicians on both sides had been wilfully ignoring the warnings.

"The response has been policy indecision, restrictive regulations and politically motivated bans and moratoriums that have stymied exploration and development of local gas supplies," Dr Roberts said in a statement.

Dr Roberts said onshore exploration was at its lowest level in than three decades, with expenditure falling 64 per cent last year.

A number of industry figures pointed out AEMO's warning came the same week as Victoria introduce new bans on gas exploration and development, with Energy Networks Australia accusing the state government of undermining energy security.

Victorian Premier Daniel Andrews gave his strongest indication yet he would support a portion of the state's gas production being reserved for local use.

"We are sending more than half of our gas overseas, we are exporting it out of Victoria. It is chasing the highest price," Mr Andrews said.

"If some of that should be reserved to support Victorian consumers, Victorian businesses, Victorian jobs, that's a debate I think we should have."

But the Labor leader also lashed out at Mr Turnbull for playing politics with the issue, calling for a "mature debate".

NSW Energy Minister Don Harwin said while the report does raise concerns, gas for electricity generation is only a small percentage of the energy mix in NSW's diversified market, compared to other jurisdictions.

"NSW does not have a moratorium on onshore gas exploration, like that in Victoria," he said.

Federal opposition environment spokesman Mark Butler urged the government to adopt Labor's policy of a gas export "national interest test" to ensure new gas projects wouldn't leave a shortage for domestic users.

The Australian Workers Union said Mr Turnbull should use the CEO meeting to force a renegotiation of contracts for existing gas fields to reserve a portion of Australian gas for local industry and households.

"Simply entertaining the idea of reservation for new onshore projects is not enough. It will be far too late by then," said AWU national secretary Daniel Walton.

The Climate Council said power shortages could be avoided by quickly expanding clean competitive renewable energy and storage technology.

Anti-coal seam gas campaigners Lock the Gate slammed Mr Turnbull's announcement, calling it a "slap in the face" for farmers who are having their land and water ruined by big gas companies.

With Richard Willingham

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This story PM calls energy crisis talks amid gas shortage blackout warnings first appeared on The Sydney Morning Herald.