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NSW faces gas price shock, not a gas shortage – researcher

28th January 2015

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

  

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PERTH (miningweekly.com) – Research conducted by the University of Melbourne, on behalf of The Australia Institute (TAI), has stated that gas demand in New South Wales could halve within the next decade, countermanding warnings from the industry that a gas shortage was imminent.

The Australian Petroleum Producers and Explorers Association (Appea) earlier this month warned that the state could be faced with supply shortages in the coming years, and called on the state government to invest in the sector.

However, the University of Melbourne’s report pointed out that wholesale gas prices in eastern Australia were forecast to increase at an unprecedented pace, and when combined with the carbon price repeal, ongoing energy efficiency schemes, warmer winter temperatures, and the falling costs of alternatives for gas, the demand for gas could decrease.

The report also pointed out that if unnecessary gas infrastructure was built on the basis of inflated gas demand projections, then unnecessary network costs will be passed on to New South Wales households and businesses – as happened with electricity prices over the past few years.

A gas industry “death spiral” could result as demand for gas falls, gas customers disconnect, and the remaining customers would be left to pay for ongoing gas grid operation and maintenance.

"The future of the gas grid in New South Wales needs to be addressed,” said report co-author Tim Forcey.

“Electrical appliances for space heating, cooking and hot water can provide the same services as gas, and are more efficient, cleaner and more economic. So whether we can afford having two grids – a gas grid and an electricity grid - needs to be looked at.”

TAI senior economist Matt Grudnoff noted that the state was facing a gas price shock, not a gas shortage.

“As the Independent Pricing and Regulatory Tribunal has confirmed, the gas price rises have been locked in by liquefied natural gas exports. No amount of gas mining in New South Wales will change that.

“The solution is for the New South Wales government to assist households and businesses to reduce their exposure to gas, by helping the shift to cleaner, cheaper and more efficient electrical alternatives.”

The report would be submitted to the New South Wales Gas Supply Inquiry, which was currently under way.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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