Gas shortages and price rises Australia’s next burning issue

AUSTRALIA has been warned of a gas price explosion with major political fallout, and if a shortage occurs we’ll be chained to events in Japan and China.

Consumers may be forced into paying even higher prices in coming years as a gas shortage causes LNG from Queensland coal seam gas producers to be forced back into the domestic market.

AUSTRALIA has been warned of spiralling gas prices enflaming politics as a possible shortage means the nation will be chained to events in Japan and China.

Wood Mackenzie director for Asia-Pacific gas and LNG Nicholas Browne said consumers may be forced into paying even higher prices in coming years as a shortage could mean LNG from coal seam gas producers in Queensland is forced back into the domestic market.

He said prices would rise to provide an incentive for producers to redirect gas.

“Gas prices will rise. Expect the political climate to heat up further,” Mr Browne said.

“Unless significant new reserves are commercialised within five to seven years, the east coast market comprising the eastern and southern states of Queensland, New South Wales, Victoria and South Australia will be short of gas.”

Queensland has a system of domestic gas fields but NSW and Victoria have restrictions or moratoriums on coal seam gas development.

“The market will then need to draw on the massive CSG reserves of Queensland. However, these reserves are mostly dedicated to three LNG export projects focused on selling LNG to markets such as China and Japan.

“Producers will need to be incentivised to redirect gas domestically and as such need to receive the same value they can get from selling to north Asia.

“In effect a gas-short domestic market will need to compete with Asian buyers. From now on factors such as Chinese attempts to clean up its air and Japanese summer heatwaves will directly impact east Australian gas prices and consumers.

“Utility bills will rise, squeezing disposable incomes. Australian gas-intensive industries such as petrochemicals and fertiliser production, will start to struggle to compete globally.

“A risk of closures will likely lead to more public pressure on the gas industry and government, leading to politicians stepping in (again) to berate the industry and propose solutions.”

Meanwhile, the intermittency of renewable electricity will add to the volatility of gas demand, in turn meaning pipeline capacity may need to be overbooked adding to costs.

He said there was an outlook of gas shortages in east Australia from the early to mid 2020s.