Beach Energy says gas reservation plan also risks fuel security

Beach Energy has warned that Australia’s proposed east coast gas reservation scheme could create a fuel-security problem even as policymakers try to lift domestic gas supply and ease prices.

The company said the plan risks reducing condensate output from southern gas fields, cutting a feedstock used to refine petrol, diesel and jet fuel. Beach argued the policy could therefore strengthen domestic gas availability while creating an unwanted pressure on fuel supply.

Policy pushback

Beach said the reservation scheme could shift gas volumes away from southern producers and reduce the associated condensate that comes from those fields. The company’s warning broadened the debate around the policy beyond gas prices and supply shortages to the downstream fuel chain.

The Australian reported that Beach put the possible condensate loss at up to 5 million barrels a year. Beach said that would amount to as much as 11% of the Geelong refinery’s feedstock needs and could force refiners to source more imported fuel or crude cargoes.

The company also argued that coal-seam gas from Queensland LNG operations does not produce the same liquid hydrocarbons as southern gas production, meaning the policy could have different effects depending on where the gas comes from.

Policy timeline

The federal government released a draft reservation framework in May that would require LNG exporters to reserve about 20% of gas for domestic use, according to The Australian’s reporting.

Beach has already criticised the proposal for its likely effect on prices and east coast supply. In earlier reporting, the company warned the policy could worsen supply shortfalls by 2027 and deter investment.

The new condensate warning adds another layer to that criticism. Beach is now urging further consultation before the scheme is finalised, saying the government should account for unintended downstream consequences.

Fuel security stakes

Condensate is a light hydrocarbon used in fuel refining, so any reduction in supply can matter for the broader fuel system. Beach’s point is that a policy designed to improve gas security could, if poorly calibrated, weaken Australia’s fuel-security position at the same time.

The federal government has separately committed more than $10 billion in the latest budget to fuel and fertiliser security measures, underscoring how politically sensitive the issue has become.

The question now is whether the final reservation rules will be revised to protect condensate output from southern producers while still aiming to lower domestic gas prices and improve supply.