Earlier today, the Australian Government released its Future Gas Strategy, mapping out a plan for how gas will support the Australian economy’s transition to net zero in partnership with key global stakeholders. The Future Gas Strategy aims to promote Australia’s energy security and affordability, facilitate the decarbonisation of the Australian economy and enhance Australia’s reputation as an attractive trade and investment destination.

Of key importance to the Australia-Japan bilateral relationship is the commitment by the Australian Government to maintain its position as a reliable supplier of LNG to trade partners in the region, including Japan. By recognising the role Australian LNG plays in supporting an orderly transition to net-zero, and by continuing to develop domestic emerging industries such as hydrogen and other clean energy facilities, Australia's Future Gas Strategy resonates with global net-zero priorities.

Guiding Principles of the Future Gas Strategy 

What are the six guiding principles that will underpin the Australian Government’s policy on gas?

1. Commitment to Net Zero: To reach net-zero by 2025, consumption of natural gas must be reduced and decarbonised, including through increased energy efficiency, electrification of processes, use of low-emissions gases and carbon management such as Carbon Capture and Storage (CCS).
2. Affordability: The Government will, amongst other things, focus on reviewing regulatory regimes to ensure that the gas market evolves to meet energy needs whilst remaining affordable for all users. Government decisions will prioritise timely development and discourage repeated delays, to ensure supply and affordability.
3. Supply:  New sources of gas supply are needed to meet demand during the economy-wide transition. Without future investment, there may be gas shortfalls that may increase the price and volatility of gas supply and undermine electricity reliability. New sources of gas supply may come from traditional gas extraction or low-emission gases. 
4. Shifting uses: As the Australian economy transitions, the role of gas will evolve. As households and small-businesses electrify on the road to 2050, demand for gas will remain for hard-to-abate industries, such as manufacturing and heavy transport, where it is difficult to substitute gas with other low-emission forms of energy.
5. Adaptability: Gas infrastructure in Australia’s east-coast states, will need to adapt to changes brought about by the transition to net-zero. This includes changes in the blend of gas in gas pipelines, i.e. to incorporate hydrogen or transport biomethane.
6. Trading: Australia’s ambition is to leverage its energy resources and expertise to become a leading player in the global transition to a low-carbon future. This includes maintaining its role as a reliable LNG supplier, developing new low-emission energy exports, and supporting its trade partners in their decarbonisation efforts.

The importance of Australian LNG to trade partners

Relevant to the Australia-Japan bilateral relationship, the Future Gas strategy identifies the need for Australia to support orderly energy transition by honouring long-term LNG arrangements and providing energy security to trade partners to progress net-zero plans (as per Guiding Principle 6). 

In the Future Gas Strategy, the Australian Government has identified the importance of Australian LNG to the economic growth of countries such as Japan, ROK and south-east Asia, and is committed to upholding long-term LNG supply arrangements. In particular, the Australian Government recognises that that trade partners require secure energy supply chains to achieve an orderly transition to net-zero. 

Supporting decarbonisation through CO2 storage

The Australian Government has also highlighted the significant potential Australia has for onshore and offshore CCS projects, and the role these may play in the decarbonisation of both Australia and its trade partners who lack these geographical advantages. An immediate action arising from the Future Gas Strategy is the need to establish a new program for regional cooperation on transboundary carbon capture and storage to support energy security and carbon management solutions for regional partners such as Japan. Further regulatory processes are required in Australia and its regional partners before any CO2 trading can occur; however, the Australian Government is committed to ensuring the regulatory framework be fit for purpose.

Next steps 

The Australian Government has committed to maintaining its trading partnerships with Japan (and other international stakeholders) as a reliable supplier of LNG and by developing domestic emerging industries. Norton Rose Fulbright looks forward to assisting Australian and Japanese stakeholders in achieving their energy transition goals, in alignment with the Future Gas Strategy. 

Primary Author: Yvonne Yap (Perth)

Co-authors: Andrew Clarke (Tokyo), George Gibson (Tokyo), Martin Irwin (Melbourne), Julian Traill (Brisbane)