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Canavan in no rush to abandon domestic gas security mechanism

24th January 2020

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – A review into the Australian Domestic Gas Security Mechanism (ADGSM) has found it has helped lower domestic gas prices while contributing to more secure gas supplies for Australian consumers.

“The review confirms the measures taken by the government in 2017 have been instrumental in stabilising the domestic gas market and keeping a lid on gas prices,” federal Resources Minister Matt Canavan said on Friday.

The Australian government introduced the ADGSM in 2017 to help guarantee domestic gas supplies with forecast shortages caused by growing exports and reduced production from gasfields offshore Victoria.

The review’s findings on the ADGSM’s effectiveness are supported by the competition watchdog the Australian Competition and Consumer Commission (ACCC) and Australia’s energy market bodies including the Australian Energy Market Operator (AEMO) and the Australian Energy Regulator (AER). Gas offers are around half the peak prices of over $20 per gigajoule from early 2017, before the ADGSM was introduced.

Short-term gas prices at the Wallumbilla Gas Supply Hub have fallen around 46% between February 2017 and December 2019. December 2019 prices at Wallumbilla averaged $6.71 per gigajoule compared to the February 2017 average price of $12.49 per gigajoule. This is also a 32% fall from the December 2018 average price. 

“However, I recognise that some businesses are still finding it difficult to get longer term gas offers and that some price offers remain higher than I want to see, especially when international liquefied natural gas (LNG) prices are low,” Canavan said.

“That is why we will keep the ADGSM in place until its scheduled end in 2023 and the ACCC will continue to monitor the gas sector out until 2025.

“In addition, I am going to work with states and territories during the next 12 months to consider options to establish a prospective national gas reservation policy. We can’t repeat the mistakes of the past in just letting our gas be shipped overseas with no thought to our domestic requirements.

“In doing this I will be mindful of the major contribution the LNG sector has made to energy security at home and abroad and the business opportunities and jobs provided in many rural and regional communities. Maintaining Australia’s place as an attractive investment destination and reliable LNG supplier is a key priority for the government,” Canavan said.

The review also recommends the government strengthen the ADGSM’s mechanism for securing domestic gas - the Total Market Security Obligation and that the ADGSM’s guidelines include the ACCC’s LNG netback price series as a signal of how well a market is functioning in estimating any potential supply shortfall.

These measures will help ensure that the ADGSM achieves its objective of securing gas supply for domestic users, Canavan said.

Edited by Creamer Media Reporter

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