Resources Minister Gary Gray has commissioned a "comprehensive" government analysis of the domestic gas market amid mounting concern from the manufacturing industry over soaring gas prices and a looming domestic supply shortage.
But he said the federal government did not agree that domestic gas reservation would keep gas prices down or put more gas into the local market.
"In our view it would create uncertainty and deter investment in new gas supply," Mr Gray said at an oil and gas industry conference in Brisbane on Monday.
Mr Gray hit out at lobbyists including manufacturers and environmental activists, accusing them of only pursuing their own specific agendas through “ill-informed interventions” without considering the broader economic and commercial horizon.
“These are complex issues, but the government has a responsibility has a responsibility to take policy decisions on the basis of a strong understanding of what is actually occurring rather than running the risk of policy being driven by ill-informed populism.”
Mr Gray said the new gas market study would provide better information on the gas demand-supply equation and help to identify potential supply constraints.
"It is important that we get the policy settings right, as our abundant natural gas resources are a reliable and lower-carbon source of energy for manufacturing and electricity generation," Mr Gray said.
"I would also urge gas producers and users to work co-operatively to negotiate domestic contracts, and be prepared to accept that prices are no longer at historic lows."
Mr Gray's position was echoed by his opposition counterpart Ian Macfarlane, who said any move to mandatory domestic gas reservation would be a "bad signal to investment in Australia" and would not resolve the issue.
"Whatever we do we don't apply it to existing projects and we strike the right balance that the investment and sovereign risk profiles are not impacted," Mr Macfarlane said.
If re-elected, a Coalition government would prioritise strategies to return international competitiveness to Australia's LNG sector, Mr Macfarlane said.
But Manufacturing Australia head Sue Morphet said governments needed to rethink their stance with a gas supply crisis about to hit the eastern seaboard, with most of it being diverted to exports, leaving Australians to pay one of the world's highest gas prices despite having one of the world's largest supplies.
The manufacturing peak lobby said natural gas was essential to the industry, making up 15 to 40 per cent of the cost base of common products like fertiliser, alumina, cement, bricks and roof tiles.
Without intervention, the shortage of supply and unprecedented price shock could result in the loss of 200,000 or 9 per cent of manufacturing jobs.
"Rather than asking what the cost of intervention is, governments should be asking what is the cost to the nation of doing nothing," Ms Morphet said.
Other manufacturers including Dow Chemical and Brickworks have also vocally expressed their concern over long-term gas supply.
Mr Gray also used his appearance at the Australian Petroleum Production and Exploration Association conference to slam the Greens’ “absurd” proposed blanket ban policy on all new coal seam gas exploration.
Santos chief executive and APPEA chairman David Knox told delegates at the conference that the oil and gas industry will be judged by its long-term actions and must act with this in mind.
He said fierce opposition from activists was not a new phenomenon.
“I have been around the oil and gas industry long enough to know that we will not convince everyone,” Mr Knox said.
He said individuals had a right to oppose development but that these groups did not form the majority.
“Australia cannot let the future of this industry be captured by the extreme," he said.