On Tuesday 18 December, the Australian Competition and Consumer Commission (ACCC) released the ‘Gas Inquiry 2017 – 2020 Interim Report’ which states that gas users’ longer-term concerns about prices in the east coast market could be alleviated if there is additional investment in gas development and key infrastructure.
In April 2017, the Australian Government directed the consumer watchdog to conduct a new, wide-ranging inquiry into the supply and demand of Australia’s wholesale gas.
The investigation found that suppliers expect to produce sufficient gas in the east coast to meet 2019 expected demand, yet domestic prices remain ‘too high’ for many gas users.
The ACCC states that prices offered in mid-2018 for supply in 2019 ranged from $9 per gigajoule (GJ) to $12/GJ. By August 2018, most offers to large commercial and industrial gas users were at, or above, the mid-$10/GJ level.
ACCC Chair Rod Sims said some commercial and industrial gas users told them that at these prices (which are two to three times higher than historical prices) their operations are not sustainable in the medium to longer term – which could lead to them relocating from the east coast or closing their operations.
“Once large manufacturers relocate or shut down their plants, they won’t come back,” Mr Sims warned.
Most notably, the report found that there are still constraints impeding the efficient flow of gas across the east coast and current pipeline tariffs remain ‘too high’.
Looking forward, the report states that there are considerable challenges which remain for the east coast market in the medium-to-long term, specifically the need for a greater level and diversity of supply, greater transparency and a more efficient transportation network.
For this reason, the ACCC urged state governments to ‘adopt policies that consider and manage the risks of individual gas development projects, rather than implementing blanket moratoria and regulatory restrictions’.
To assist the market the ACCC aims to continue to publish key market information, monitoring the effectiveness of reforms and monitoring the operation of the market.
“While this will assist commercial and industrial gas users to make more informed investment decisions, greater investment in gas development and infrastructure is the key to addressing the immediate and longer-term concerns in the East Coast Gas Market,” the report states.
In response to the document’s release, Australian Petroleum Production and Exploration Association (APPEA) Chief Executive, Dr Malcolm Roberts, said state governments wanting lower gas prices, more investment and more diversity of supply should follow the Northern Territory’s lead and support the safe, responsible development of the resources in their state.
“As we look to 2019 and beyond, it is time to shift the focus back to where it belongs – the need to ensure more gas supply and more gas suppliers. This should be the focus of all governments,” Mr Roberts said.
Find the full ‘Gas Inquiry 2017 – 2020 Interim Report’ here.