AGL sending $2b of gas overseas while Aussies are ‘ripped off’

AGL has quietly been exporting a vast amount of gas while Australian companies are charged more for gas than the export price paid by companies in Japan or China.

UNDER-siege energy giant AGL has begun sending $2 billion of crucial gas overseas — enough to power Wollongong for 254 years.

The energy retailer has quietly been selling a vast amount of gas to the liquefied natural gas (LNG) export market since January. It comes as a Turnbull government minister accuses the company of “ripping off” Australians by charging local companies more for gas than the export price paid by companies in Japan or China.

The issue is so bad Australian Competition and Consumer Commission chairman Rod Sims said he will investigate why Australians are paying an “excessive” price.

Australian Competition and Consumer Commission chairman Rod Sims says he can’t understand why prices quoted to local companies are as high as they are. Picture Kym Smith

“We cannot understand why the prices that are being quoted to many companies are as high as they are, given what we understand the underlying gas price is,” Mr Sims said.

“Particularly in NSW and Victoria, we are seeing prices that are $2-$6 a gigajoule more than you would expect ... We are not sure where the excessive pricing is coming from.”

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AGL struck a little-known deal with Queensland’s Gladstone Liquefied Natural Gas (GLNG) on Christmas Eve 2015 to sell it 254 petajoules of gas over 11 years. This gas will go offshore. Experts say one petajoule is enough to power a regional city like Wollongong for a year. AGL has plans to sell 34 petajoules to Gladstone next year alone. The deal comes as the federal government received two reports warning NSW and Victoria face a severe gas shortage of between 54 and 108 petajoules in 2018, pushing up electricity prices.

Gladstone Liquefied Natural Gas’s refinery will handle 254 petajoules of gas in a deal with AGL, which it will sell offshore. Picture: Patrick Hamilton/Bloomberg

AGL is not an exporter but under this deal it sells the gas to GLNG, which sells it offshore. The deal would even see AGL potentially profit from a looming gas shortage in Australia.

Prime Minister Malcolm Turnbull has secured initial agreements from gas exporters Shell, Santos and Origin to ensure there is enough domestic supply next year.

Cities Minister Angus Taylor, who has deep experience in the energy sector, said while there was little that could be done to stop exports, AGL has a responsibility to sell to Australians at or below the export price of about $8 to $9 a gigajoule. “Gas producers shouldn’t be ripping off Australian companies to bolster their profits,” he said.

AGL declined to respond to most questions from The Daily Telegraph about the rate it was selling gas headed offshore.

“This transaction was completed prior to the announcement of the closure of the Hazelwood power station, which significantly increased the demand for gas generation,” a spokeswoman said.