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Gas industry pushes for further easing of restrictions to boost supply

2nd August 2018

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – The resources industry has called for a further easing of restrictions on the gas industry to ensure the development of more supply, according to the Australian Competition and Consumer Commission’s (ACCC’s) latest Gas Market Inquiry report.

The ACCC said on Thursday that while conditions on the east coast gas market had eased considerably since the extremes reported in 2017, only action by governments and the gas industry to increase domestic gas supply could bring material price reductions into the future.

While there would likely be sufficient gas in 2019, prices remained two to three times higher than historical levels, the ACCC said, noting that the lower forecast demand and increased southern production in 2019 was unlikely to be sufficient to lower gas prices.

“While gas market conditions have improved, these market conditions can change and the reality is that more gas is required to lower prices to users,” ACCC chairperson Rod Sims said.

“Prices, and the market generally, are very challenging for gas users, who must constantly consider their investment plans, employment levels and even in some cases their continued operation.”

“To improve market conditions, the east coast gas market requires a greater level and diversity of supply, a more efficient transportation network, and greater transparency. To lower prices in the southern states, lower-cost gas must be produced in the southern states,” Sims said.

“Gas production costs are increasing and gas prices in the east coast market are now shaped by international liquefied natural gas (LNG) prices, meaning that domestic prices are unlikely to return to historic levels.”

“The ACCC continues to urge state governments to adopt policies that consider and manage risks of individual gas developments rather than implementing blanket moratoria and regulatory restrictions,” he said.

Sim’s plea was echoed by the Australian Petroleum Production and Exploration Association (Appea), which pointed out that gas producers, particularly LNG producers, had made significant volumes of additional gas available to the local market.

Appea CEO Dr Malcolm Roberts said that the October 2017 agreement between LNG producers and the commonwealth government ensured that any uncontracted gas was offered to domestic customers first.

“In the past year, we have seen significant announcements from Arrow Energy, Shell Australia, Senex, Cooper Energy, Strike Energy, Gladstone LNG, Australia Pacific LNG, Origin Energy, Santos, ExxonMobil and BHP to bring on new supply.

“The report also restates the ACCC’s concern that customers in New South Wales and Victoria will continue to pay more for their gas because of state government restrictions on developing local gas resources. Importing gas from Queensland can add $2/GJ to $4/GJ to the price paid by consumers in the southern states.”

Roberts said that state and territory governments wanting lower gas prices have the solution to hand – follow the Northern Territory’s lead and support the safe, responsible development of the resources in their state.

“It is now 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.”

The Queensland Resources Council (QRC) has also urged the southern states to develop their own gas resources in order to boost supply and lower prices, with CEO Ian Macfarlane saying on Thursday that Queensland had been safely developing its coal seam gas industry over the past 20 years.

“The fact that we have developed our resources has meant not only gas for us here in Queensland, but it’s also been the supply that’s kept the lights and the heaters on in New South Wales and Victoria,” Macfarlane said.

“Queensland is our nation’s energy super power, exporting coal-fired electricity and gas to southern states.

“Our gas industry has also paid almost A$400-million to local landholders, who have benefited directly from co-existence with the gas industry, which is particularly important as landholders battle with the current severe drought.

“Queensland is the case study that works, and other states ignore it at their peril.

“New South Wales and Victoria can’t expect Queensland to continue to supply, and subsidise, their own gas users when each of those states has either a handbrake or a full-blown ban on any gas development.”

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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