Australia’s gas supply outlook will remain steady through next year despite the ongoing impact of the COVID-19 pandemic, according to the Australian Competition and Consumer Commission’s (ACCC) latest Gas Inquiry 2017-2025 Interim Report.
In April 2017, the Federal Government directed the ACCC to conduct a wide-ranging inquiry into the supply of and demand for wholesale gas in Australia, as well as to publish regular information on the supply and pricing of gas for the next three years.
In July 2019, Treasurer the Hon. Josh Frydenberg MP, wrote to the ACCC extending its inquiry into the gas market until December 2025.
The ACCC’s latest report, published today, outlines that the majority of offers by producers for supply in 2020 and into 2021 fell to between $8–$10/ Gigajoules (GJ).
There is also evidence of further price falls since February, with prices being offered in Queensland falling below $7/GJ.
It notes that COVID-19 appears to have had little effect overall on East Coast gas production or consumption so far in 2020, compared to the same period last year.
Sufficient supply has also been confirmed to meet forecast domestic and export demand in 2021.
This is enhanced by LNG producers being well placed to alleviate any potential supply pressures. It is expected 84 petajoules (PJ) of excess gas in 2021 could be directed to the domestic market.
Yet, the ACCC raised concerns in regards to the widening divergence between domestic price offers and the LNG netback price.
There are also reports that some LNG spot cargoes have been sold at well below the prices being offered to the domestic market.
Treasurer Frydenberg said the Federal Government welcomes the latest report from the ACCC into the east coast gas market.
“The impacts of the COVID-19 pandemic are being felt across the economy which is why it is important that the Government and the ACCC continue to monitor developments in Australia’s gas markets to ensure Australia’s consumers and businesses benefit from competition,” he said.
Minister for Energy and Emissions Reduction Angus Taylor said the Government expects gas producers to reflect internationally competitive export prices for Australian gas users.
“Australian gas must be working to benefit all Australians. It is essential that local gas users see the price reductions locally that are available on the LNG export market. We expect these price reductions to be passed on fairly,” Minister Taylor commented.
“We support the ACCC issuing a compulsory request to seek more supplier pricing data so that we can better understand this pricing difference.”
Beyond 2021, the supply outlook is expected to tighten, with the ongoing impact of COVID-19 casting uncertainty over the longer-term outlook.
“Australia’s competitive advantage has always been based on cheap energy, particularly for the manufacturing sector,” Minister Taylor said.
“Gas will be central to our ongoing economic recovery. A robust and competitive gas industry will allow both gas producers and users to thrive, with lower prices benefiting all Australians.”
The ACCC recommends the Commonwealth Government’s Heads of Agreement with Queensland LNG producers be extended past 2020 to improve supply certainty.
It further recommends that the Government work with industry to include a reference to the netback price in the Agreement to make commitments that support domestic gas users.