* Watchdog sees tight gas supply for 2018
* Says Santos has not done enough to boost local supply
* Watchdog says exporters should not be selling spot LNG (Adds ACCC chairman, petroleum association comments)
By Sonali Paul
MELBOURNE, Sept 20 (Reuters) - Australia's competition watchdog said on Wednesday the country's east coast gas exporters have not done enough to shore up local supply, in a warning shot ahead of a decision by the government on whether to curb LNG exports in 2018.
The comments by Australian Competition and Consumer Commission Chairman Rod Sims hint at what the watchdog may recommend to the government, which is due to decide by Nov. 1 whether to limit LNG exports, based on reports from the commission and the Australian Energy Market Operator.
"The gas supply outlook in 2018 now appears worse than at the time of our first gas report in March 2016," Sims said in a speech in Canberra.
Recent deals announced by companies like Origin Energy ORG.AX , co-owner of the Australia Pacific LNG plant, and Santos Ltd STO.AX , operator of the Gladstone LNG project (GLNG), to boost local gas supply had done little to help the market, he added.
"I said six months ago ... if I were providing private advice to the LNG producers I would say they would be well advised to support the domestic market as much as possible at this crucial time. They have largely not done so."
GLNG, co-owned by Santos, France's Total SA TOTF.PA , Malaysia's Petronas and Korea Gas Corp 036460.KS , is considered most likely to face export curbs as it is taking gas from the local market to help fill its export contracts.
Sims said Santos had taken some highly visible steps to boost east coast supply, "but none of these moves have made any serious inroads into the gas supply problem." said it was puzzling that LNG exporters were selling uncontracted volumes on the spot market offshore rather than into the higher priced domestic market, especially at a time when local businesses and households are up in arms over soaring gas prices.
"The point I make is, you just have to have some focus on the environment you are in and I think the LNG producers selling spot when we have got real problems with domestic available gas, I think that is unwise personally," Sims said.
Santos had no immediate comment on his remarks.
Australia's main petroleum industry group said this week a dozen new gas contracts or projects have been signed or announced since March to boost supply, equivalent to about 10 percent of east coast demand, and urged the government not to restrict exports.