Weeks before Russia invaded Ukraine, but when it was still constraining gas supplies to Europe amid soaring demand and prices, Prime Minister Scott Morrison suggested Australia could step in and help, given its huge liquefied natural gas export industry. The flexibility of LNG cargo compared with fixed-direction pipelines is one of its selling points, especially for an island nation with a vast surplus of gas.

Record-high and volatile oil and gas prices, a running problem that was given a shot in the arm when Russia invaded Ukraine, have convinced oil bulls that their product has a crucial role to play for decades yet. While renewables proponents suggest that wind, solar and battery technologies are crucial to energy independence, there remains a place for some oil and gas in the medium term.

In 2020, oil fell to US$20 per barrel, its lowest price in decades; two years later, it is at record highs of over US$100 a barrel. The European gas benchmark, the Titles Transfer Facility, spiked with news of the invasion given that Russia supplies more than 30% of the continent’s natural gas.

Over the past two weeks, first the US and now the UK and Australia have banned Russian crude exports (although it’s essentially a non-issue for Australia; last year Russian crude made up only 1.2% of its imports).

Australia stands to benefit from the fuel crisis in the short to medium term, but based more on prices than on any agile ability to supply tight, high-priced markets.

Australia is the world’s largest LNG exporter at around 80 million tonnes in 2021, but the US is breathing hard down its neck. Last year, Australia’s share of the Chinese market slipped by a few percentage points even as actual volumes grew.

Meanwhile, US volumes increased three-fold and it overtook Qatar as the second largest exporter to China. The US signed six contracts with Chinese buyers last year and Australia signed none. The government’s 2017 trade white paper explicitly suggested that the US was a threat to Australia’s market share, even as world gas demand was expected to shift slightly from legacy buyers going green to developing nations with rising energy demand.

China receives some LNG from Russia, but the gas giant has only an 8% share of the global LNG market. That could grow next year if the Arctic LNG 2 project, led by Russia’s Novatek, comes online as planned; however, last week French partner TotalEnergies committed to not spending any more cash on the project and said it would wind down its activities with Russia. This week it said it would comply with any sanctions but would not offload its assets. It did, however, say development of the project would be difficult with technology sanctions in place.

China’s gas imports from Russia come through the Power of Siberia pipeline, which has an annual capacity of 38 billion cubic metres. Volumes are set to increase with the Sakhalin gas deal announced at the Beijing Winter Olympics, but it will need to replace partner Shell.

BP and Shell pulled quickly out of Russia in the first days of the invasion, with the British company walking away from a 20% stake in Rosneft worth billions of dollars and a difficult 30-year history in the country.

There will likely be buyers for these assets, but some analysts have noted that there could be intellectual-property issues, and LNG projects have typically been underpinned by some international oil company know-how.

With bans and a gas dearth amid unprecedented levels of demand in Europe, this is where the PM suggests Australia can come in.

The issue (apart from Morrison not consulting industry before making the proposal) is that there’s simply not much LNG available, and new supply is at least four years away. Santos plans to temporarily close down its Darwin LNG plant next year while it develops its new Barossa field for backfill in 2025, Woodside may do the same in one train at the North West Shelf LNG venture, and Shell’s floating LNG vessel remains closed after a fire last year.

As Europe comes to grips with the need to diversify its gas supply, Australia’s LNG producers may be able step up. That could include bringing on another LNG train or two in Darwin and development of Woodside’s Browse field, which has been close to seeing a final investment decision three times for three separate development iterations. The second train at Woodside’s Pluto and Scarborough fields will add 5 million tonnes per annum. These are longer term speculations, however.

The immediate problem, though, is that at least 75% of Australia’s LNG is sold via long-term contracts linked to the oil price, typically at a price slope of between 11% and 14% and on a three- to six-month lag. This means the record profits for 2021 reported by Australia’s largest oil and gas companies when oil ended the year at US$80 per barrel will be dwarfed if the price stays above US$100.

Australia can’t supply more to Europe without breaking contracts—or rather the project proponents can’t. The government can only intervene in gas exports when the local market doesn’t have enough supply, and that remains an issue only on the east coast since Western Australia, home to two-thirds of exports, has its own island market.

Buyers can elect to vary their contracts by 10%, but it’s unlikely they will when replacement ‘spot’ cargoes are more expensive.

Another issue is that there’s already a gas shortage on the east coast. Roughly a third of LNG is developed there via onshore coal-seam-gas wells and shipped, and some supply is sent from offshore Victoria to Queensland, so any gas we could supply would have to be taken from our own struggling system, and manufacturers. This may become feasible as renewable energy replaces gas in the electricity grid, but according to Rystad Energy that won’t be until the end of the decade.

At this week’s Australian Domestic Gas Outlook conference in Sydney, the head of the Australian Consumer and Competition Commission said too much east coast gas was going to the LNG projects and there could be a shortage by 2024.

On the west coast, what is not exported via contract is kept in the state under its mandatory 15% domestic gas reservation policy.

The wholesale exodus of European majors with decades of history in Russia in less than a week is going to take a long time to unfold and energy markets are going to fundamentally change, but Australia is in no position to solve the problem anytime soon.