‘High cost’ dig riles energy producers

Big energy producers have clashed with the Albanese government over threatened gas price intervention.

Big energy producers have clashed with the Albanese government over threatened gas price intervention

A fresh scrap has broken out between gas producers and the Albanese government on energy prices as Labor prepares an intervention in the market to ease high costs.

Industry and Science Minister Ed Husic on Thursday said gas contracts offered by LNG exporters were “just as high if not higher”, despite the federal govern­ment’s negotiated heads of agreement signed in September to drive down prices.

The Australian Production and Petroleum Exploration Association responded by saying it was irresponsible for a federal cabinet minister responsible for business policy to demonise and misrepresent the gas industry.

“It is easy to misrepresent how the gas market works, but the facts are that average domestic prices are well below international prices,” APPEA chief executive Samantha Mc­Culloch said.

“While a range of prices can be offered to customers in direct negotiations, the average realised domestic prices reported by APPEA members to the Australian Securities Exchange for the third quarter sit between $8.50 a gigajoule and $13.10/GJ, well below the international market.”

Anthony Albanese on Wednesday vowed to broker short-term relief from soaring energy prices by consulting heavily with business and governments.

Big energy users have backed a price cap at $10/GJ, which could be reviewed in three years. “We feel that governments and regu­lators understand the gravity of the situation, what’s at stake and the need to act quickly,” Energy Users of Australia chief executive Andrew Richards said.

“We think a solution can be found that still allows the gas industry to make reasonable returns on domestic gas sales – while making very good returns on the 80 per cent they export – and deliver a gas price that allows business to survive, takes pressure off household budgets and helps to put downward pressure on electricity costs.”

Consultancy EnergyQuest pointed to the central role gas played during last winter’s energy crisis and questioned the consequences of a $10/GJ cap. “We have also seen that when coal and renewables are down, gas is the only reliable backup of scale. A $10GJ cap would further limit the ability of gas to respond,” EnergyQuest chief executive Graeme Bethune said.

It was also unclear how a cap might work across retail and wholesale markets and whether it would apply to the three Queensland LNG producers or east coast suppliers more broadly, he said.

A revamp of the gas industry’s code of conduct to cut prices was one option, but APPEA said it would need to be widened to include buyers and sellers. “If the government is to go down the path of making the code mandatory, it should be broadened to include customers to ensure full transparency around the commercial conduct of all participants,” Ms McCulloch said.