ACCC finds domestic gas twice the price of exports
ACCC urges the government to act on the ‘widening’ gap between how much Australians and foreign customers pay for our gas.
Gas is selling on Australia’s east coast at almost double the price it is being exported for, a new report reveals.
An interim report from the Australian Competition and Consumer Commission shows Australian domestic customers were slugged between $8 and $11 per gigajoule in late 2019 and early 2020.
This was compared to LNG export prices of below $6 per GJ since early 2020.
The discrepancy between domestic and international prices has been growing for some time, according to ACCC analysis.
“The ACCC is very concerned with the widening gap between domestic and export parity prices, which will have an inevitable impact on Australia’s industrial sector during what is already a difficult economic period,” ACCC Chair Rod Sims said.
Mr Sims notes that although the east coast gas market is expected to have sufficient supply through to 2021, the risk of shortfalls in the southern states in the medium term has grown.
Gas extraction in the Bass Strait has been in decline for decades, with Australia’s Energy Market Operator warning last year it expected declines in the field could see east coast market shortfalls by 2024.
The regulator notes the danger of gas shortages across the east coast market and recommends the Commonwealth Government Heads of Agreement with LNG producers be renewed beyond 2020.
The gas deal was signed in 2018 with the goal of improving gas supply to the east coast.
It agreed that suppliers would offer uncontracted gas to the domestic market to meet a shortfall and uncontracted gas must be first offered to the domestic market on “competitive market terms”.
As part of the deal the ACCC was required to monitor and report on its commitments.
“As well as extending this heads of agreement, we think the government should consider strengthening the agreement’s price commitments,” Mr Sims said.
“For example, reference could be made to LNG netback price expectations and the prices LNG exporters could expect to receive for uncontracted gas in overseas markets over the relevant period.”
The ACCC also recommends giving further consideration to improving north-south gas transportation infrastructure or the construction of import terminals on the east coast.
The regulator also recommends the government boost supply of gas into the market by granting new tenements by stimulating competition between suppliers.
However it warns that governments consider adopting a “use it or lose it” active tenement management approach to stop suppliers sitting on deposits and ensure they bring the gas to market in a timely manner.
