Australia plans LNG export limits to meet domestic gas crunch

SYDNEY, April 27 (Reuters) - Australia's conservative government has proposed a radical plan to restrict exports of liquefied natural gas (LNG) at times when domestic shortages push up local prices.

The Australian Domestic Gas Security Mechanism is aimed at ensuring the domestic price of gas is affordable and reflects global export prices.

The proposal follows two rounds of meetings between Prime Minister Malcolm Turnbull and producers and the Australian Energy Market Operator to discuss a domestic gas crunch.

"It is unacceptable for Australia to become the world's largest exporter of liquefied natural gas but not have enough domestic supply for Australian households and businesses," Turnbull said in a statement.

Under the plan, Australia's resources minister would have the power to impose controls on LNG exports based on advice from the market operator and regulator.

"If an exporter is not a net contributor to the domestic market – that is, they draw more from the market than they put in – they will be required to outline how they will fill the shortfall of domestic gas as part of their overall production and exports," Turnbull said.

The Australian Energy Market Operator warned in March of a shortage set to hit eastern Australia just as the country becomes the world's top LNG exporter.

At least one of the east coast LNG plants, Gladstone LNG (GLNG) - operated by Australia's Santos Ltd (Dusseldorf: STS1.DU - news) - is drawing gas out of the domestic market to help meet its export contracts.

Companies including France's Engie SA (LSE: 0LD0.L - news) and Origin Energy have sealed deals to ensure gas supply to power plants at peak times, easing some short-term concerns about shortages that have already helped to trigger blackouts.

High and rising prices for gas have become a political hot potato for the Liberal National government as businesses warned they could go bust if action was not taken. (Reporting by Wayne Cole; Editing by Richard Chang)