PATRICIA KARVELAS: Heaters across the country's south have been on full blast this week. But there are warnings a looming gas shortage in the South East of the country could rapidly drive up prices for households and businesses. The concerns sit uncomfortably in the middle of a tense energy debate about the future of Australia's energy mix. Madeleine King is the Resources Minister. She's our guest this morning. Minister, welcome. 

MINISTER MADELEINE KING: Good morning, Patricia, good to be here again. 

PATRICIA KARVELAS: Why are we facing a gas shortage this winter? 

MINISTER MADELEINE KING: Well, I know there's been reports about this, but the reports we have to Government through AEMO show quite the opposite, and because of the work I've done on the Heads of Agreement, and I've done with Minister Bowen on the Government's Gas Code of Conduct means there is sufficient gas in the system. There will, of course, be these periods of high demand, as it does get colder, and we know places like the ACT and Victoria do rely heavily on gas to heat their housing at the moment. So there is a strong demand for that gas, and that's exactly why we have back‑up storage systems, and also have made sure through those two devices I've mentioned earlier, the Heads of Agreement and the Code of Conduct, that there will be sufficient gas available for the community. 

PATRICIA KARVELAS: You say quite the opposite, but the Australian Energy Market Operator says the threat of gas supplies running short extends from New South Wales to Victoria, South Australia, Tasmania and the ACT, and could last until September. I mean AEMO says that very clearly. 

MINISTER MADELEINE KING: Yeah, well, the AEMO's role is to warn of such things, and that's absolutely their job, so that governments ‑‑ 

PATRICIA KARVELAS: Well, they're not making it up though, are they? 

MINISTER MADELEINE KING: No, no, no, they're not making it up, but what I'm saying is we have secured gas to make sure it falls into the system. At the moment there is a bit of a pipeline constraint, I won't deny that of course, so coming from ‑‑ 

PATRICIA KARVELAS: So talk to me about the pipeline constraint ‑‑ 

MINISTER MADELEINE KING: ‑‑ Queensland ‑‑ 

PATRICIA KARVELAS: ‑‑ and what's happening. 

MINISTER MADELEINE KING: Well, it's just that it's full, because everyone wants the gas really quickly, and that is the thing about gas, is it's so flexible, you can turn it on and off, so recently the pipeline was not full, people want gas for their heating, it becomes full very quickly, and it is a gas pipeline that has a limited amount of gas that can literally go through it, as like you'd hose your garden or something, you know, so that is the constraint. But what is ‑ and AEMO are right to point out that if we don't keep that gas flowing, and we don't have Heads of Agreement, we don't have the Code of Conduct, there will be a shortage, and that's why we have those things in place, to prevent that shortage, and we're making sure that happens, and I can assure listeners and ‑‑

PATRICIA KARVELAS: So that deals with the shortage issue, but it doesn't deal with the price issue, does it? 

MINISTER MADELEINE KING: Well, the Gas Code of Conduct does deal with the price, and we have a cap on gas pricing that we introduced, you know, a couple of years ago now when we ‑‑ 

PATRICIA KARVELAS: A cap, sure, but it doesn't ‑‑ 

MINISTER MADELEINE KING: ‑‑ first inherited this mess. 

PATRICIA KARVELAS: ‑‑ doesn't mean that prices won't be higher if this continues.  

MINISTER MADELEINE KING: Well, no, the cap does work to keep prices low. I mean, and I've said this before, I mean prices for gas will not again be the all‑time lows that we saw from the very cheap and abundant gas that was a by‑product of the oil industry in the Bass Strait. So gas prices have gone up, but this Government has taken action to make sure they remain at a steady state, under the $12 rate, and that is something, of course, the Coalition voted against, but we were determined to make sure that there was a proper Code of Conduct in place as well as a price cap in place to keep prices affordable for Australian consumers, but also the manufacturing industry, and that is precisely what is happening. 

PATRICIA KARVELAS: But they can still go up, right, if this constraint continues? 

MINISTER MADELEINE KING: Well, not with a cap, no. 

PATRICIA KARVELAS: No, no, they can't exceed the cap, I don't mean ‑ no, they can't exceed the cap, of course, I understand that, but that doesn't mean they can't go up. 

MINISTER MADELEINE KING: Oh, well, yeah, if the price is under the cap, and yeah, well, the cap is the limit, I suppose. 

PATRICIA KARVELAS: Yeah, and that's the point I'm making. So this could have an impact. 

MINISTER MADELEINE KING: Oh, okay, sorry. 

PATRICIA KARVELAS: So this could have an impact. 

MINISTER MADELEINE KING: Well, it could, but as one would expect, when there's a high demand, prices do go up, but there remains a cap, so that they don't go up into the stratospheric kind of pricing we saw when we came into government two years ago, because there had been no attention paid to how the gas market works by the Coalition. So, yeah, sorry, I'm sorry I misunderstood your question.

PATRICIA KARVELAS: No, that's fine. 

MINISTER MADELEINE KING: It would ‑ it could go up, but it is limited, and importantly limited to make sure there is affordable gas for households and manufacturing. 

PATRICIA KARVELAS: Experts say the Government's gas trigger would have to have been pulled last year to force gas exporters to reserve gas for domestic use now. Pulling the trigger now would reserve it for next year. So are you prepared to pull the trigger now for next year given this is a scenario we're facing this year? 

MINISTER MADELEINE KING: Well, we reformed the gas security ‑ Domestic Gas Security Mechanism as soon as we came into government, because it was an annual opportunity, which wasn't sufficient, so now that has changed and it can be a quarterly opportunity, which is a decision I make off the back of discussions with the gas industry in Queensland, which I'll be having very shortly, as we do, just regularly part of normal government business, and my role as Minister for Resources to make sure that supply is there. So if it's needed, you know, we have that option around the ADGSM, but what we have found, and I'm sure I'll continue to find, is the gas [indistinct] Queensland [indistinct] different methods, whether it be seasonal shaping or other things to make sure that there is sufficient gas supplies to the East Coast. That will continue, those discussions continue as a matter of course and a matter of good government, and this is just one of the many reforms we've introduced since ‑ I mean immediately upon coming into government two years ago, to make sure that this problem was addressed. 

PATRICIA KARVELAS: Minister, there are reports Japan is increasing its purchases of Australian gas, but on‑selling the extra gas they don't need to other South East Asian countries like the Philippines, Vietnam, India. Is that appropriate? 

MINISTER MADELEINE KING: Well, the thing is gas does have to keep moving, and Japan has entered into very long‑term contracts around its gas supply. I mean it's also invested, you know, many tens of billions of dollars in the industry in Australia, which has created thousands of Australian jobs. So their energy security relies on being the centre of a deep and liquid market for gas, and our role is to supply that, so they do ‑‑ 

PATRICIA KARVELAS: So do you think it's fair enough that they on‑sell it? 

MINISTER MADELEINE KING: ‑‑ well, I'm just ‑ what happens is they don't ‑ I mean what is interesting about this story is that it ‑ no, they do on‑sell it. So let me get this straight. But they on‑sell it when their demand changes, so the LNG goes into Japan, they, like we do, have fluctuations in weather and demand for gas, and they use what they need to use and then what they can't use, and 'cause you have to keep moving molecules along, they do on‑sell, and that supports wider regional energy security and that's an important thing. The worst thing that could happen is that for Japan to decide, "Well, we've ordered too much gas this month in our forward projections, and instead of on selling it so it can be used and not wasted, we would vent it", and we don't want that ‑‑ 

PATRICIA KARVELAS: No, of course not. 

MINISTER MADELEINE KING: ‑‑ because that's [indistinct] methane. 

PATRICIA KARVELAS: But the big question is ‑‑ 

MINISTER MADELEINE KING: So we want ‑ we want them to keep the liquid ‑‑ 

PATRICIA KARVELAS: ‑‑ why are big corporations in Japan taking gas from domestic users and creating a shortage here? 

MINISTER MADELEINE KING: Well, the thing is that they're not taking it from domestic users, because gas exported out of Queensland for the very, very most part does not go to Japan at all. Gas to Japan is exported out of Darwin and Western Australia. So if the argument is somehow if we stopped exporting gas to Japan from Western Australia and NT that it would suddenly become available to shore up supplies in the East Coast, well, that is just manifestly incorrect, because there's no ‑ that's not a joined up system, and Western Australian gas does not have a pipeline to the east, there's still no import terminals, and same with the NT. So it's just ‑ it's not a part of the range of solutions we would have to gas supply on the East Coast. But moreover, I think, you know, it would ‑ it seems bizarre to me that people might think that the Japanese Government and these Japanese companies have contrived to spend all this money developing these projects over decades, not with a primary aim of underwriting their own energy security, but for some kind of notion that they might seek to profiteer off gas and on‑sell it. That is sort of peak conspiracy theory in my opinion. But the thing is people need to understand that gas ‑‑ 

PATRICIA KARVELAS: I think people's concerns are for domestic users, businesses, households, who clearly need gas. 

MINISTER MADELEINE KING: Look, and that's understandable, and I will ‑ as I've explained, the gas that goes to Japan is not really available to the domestic market in Australia, simply because it's not connected to the places from which it is extracted. It's as simple as that. There's not a pipeline from Darwin to Melbourne, there's not a pipeline from Karratha to Sydney. There is no connection between the access to the gas off the Western and Northern Coast to the Eastern Coast, so that's just a simple matter of infrastructure, meaning that that's not possible, and of course Western Australia and NT are well supplied in gas. So it doesn't affect them either. 

PATRICIA KARVELAS: Minister, thanks for joining us this morning. 

MINISTER MADELEINE KING: A pleasure, Patricia, thank you. 

PATRICIA KARVELAS: Resources Minister, Madeleine King.