‘Unanswered questions’: Dutton’s plan to cut gas bills under fire from experts

Opposition Leader Peter Dutton is facing pressure to explain how his plan to cause a gas glut in eastern Australia will lead to sustained energy bill relief, as experts and industry leaders rubbish the Coalition’s modelling for failing to understand how the market works.

Long-awaited modelling released by the Coalition claims its policy to hold back more liquefied-gas shipments from Queensland will slash wholesale gas prices to $10 a gigajoule, easing household gas bills by 7 per cent a year. Because gas-fired generators supply about 10 per cent of the electricity consumers draw from the grid, the modelling from Frontier Economics said it would also cut power bills by 3 per cent – about $60 a year.

The opposition leader is facing pressure to explain how his plan to cause a gas glut will lead to sustained energy bill relief.Credit: James Brickwood

However, energy experts on Wednesday countered those claims, which they said failed to consider the added costs of $2-$4 involved in transporting gas thousands of kilometres from Queensland to consumers in Australia’s populous south-east.

The Coalition last week clarified it intended to cut gas prices to $10 at Queensland’s Wallumbilla gas hub – not the wholesale price for delivered gas into Victoria or NSW.

Once the cost of piping gas south is factored in, the policy is “not going to make any difference” to today’s prices in southern markets, which averaged $12.28 in NSW and $12.97 in Victoria across 2024, said Rick Wilkinson, chief executive of consultancy EnergyQuest.

“Getting gas from Wallumbilla to Sydney costs $2.36, and if you want to move it down to Melbourne, that’s an extra 58¢,” Wilkinson said. “That gets you to $12.94.”

Another key detail missing from the policy is how the extra gas held back from export can be sent to the southern states in the first place: the sole pipeline linking Queensland to the south is already often at capacity in winter, when gas is most needed for heating.

There is also insufficient storage capacity to stash gas in off-peak periods.

“If you don’t have pipeline capacity or storage, you aren’t actually adding anything,” Wilkinson said.

The Coalition’s “Australian gas for Australians” scheme – a pitch to voters struggling with energy bills and other living costs – would force exporters of super-chilled liquefied natural gas (LNG) to hold back a significant amount of their “uncontracted” volumes to shore up domestic supplies.

Queensland’s LNG exporters sell most of their gas on long-term contracts to buyers in Asia, while the rest of their supplies are carved up between one-off deliveries on the international LNG spot market and domestic sales in Australia. Two of the state’s three LNG giants – the Origin Energy-backed APLNG venture and Shell’s QCLNG – are among Australia’s biggest east-coast domestic suppliers, typically contributing about 40 per cent of all gas used in cooking, heating, power and manufacturing.

The Coalition’s plan would force them to go even further and reserve another 50–100 petajoules a year, enough to cover 20 per cent of the entire east-coast market.

The policy has been welcomed by industrial gas users, including companies in the manufacturing sector, which need the fossil fuel for energy or as a feedstock.

“Gas prices above $10 per gigajoule are simply untenable in a gas-rich country like Australia,” said Ben Eade of Manufacturing Australia, whose members include companies such as BlueScope Steel and Brickworks.

The Australia Institute, a progressive think tank, also cheered the gas-reserve plan as a “turning point”.

”Dutton is rightfully arguing Australia has an abundance of gas and that all we need to do is to tax gas exports to ensure our gas flows first to Australian businesses and households,” executive director Richard Denniss said. “This is a big shift.“

‘The unintended consequences could make matters worse.’

Rick Wilkinson, chief executive of consultancy EnergyQuest.

Others, however, question the logic of flooding the market with so much extra gas. While it may bring some short-term relief for companies like manufacturers, gas producers caution that forcing an oversupply of gas priced below the cost of producing it would erase any incentive for them to drill for supplies beyond what they need for their export contracts.

This could raise the risk of gas shortages and price spikes hitting later this decade when the Australian Energy Market Operator is forecasting a shortfall in Victoria and NSW, as gas output from Bass Strait continues depleting rapidly.

“No one is going to invest in supply at that price,” said one industry source, not authorised to speak publicly.

Samantha McCulloch, chief executive of gas industry association Australian Energy Producers, said Frontier’s modelling left “many unanswered questions” and reaffirmed its worries that the proposed intervention would drive out investment at a time when a supply boost was sorely needed.

“There would be no incentive to produce sub-economic gas, and it would damage already suppressed investor confidence,” McCulloch said.

The Coalition fielded questions on Wednesday about the mechanics of its reservation plan, including how it would ease the cost of living when the modelling showed annual power bill savings of just 3 per cent, or $1 a week.

Dutton said the policy would keep a lid on gas prices following a 34 per cent price rise since Labor was elected in 2022, and insisted it would benefit consumers by ensuring lower costs across parts of the economy that depend on affordable gas.

“We are talking about flat-lining and reducing prices … not just in household bills but also the cost of the builder who’s buying steel, the farmer who’s buying fertiliser,” he said. “If we can bring down that cost for every part of the economy that relies on gas and the use of gas to create and generate electricity, the difference between the two parties is quite staggering.”

Wilkinson said Frontier’s modelling suggested the Coalition had not considered the long-term risk that a reservation scheme would discourage spending on the new supplies Australia needs to avert looming shortfalls and higher prices.

“The unintended consequences could make matters worse,” he said.

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