PERTH (miningweekly.com) - The Australian Competition and Consumer Commission (ACCC) has released its latest Gas inquiry 2017-2025 Interim Report which has confirmed that there is currently no shortfall in the domestic gas market.

The report noted that domestic gas prices fell significantly during the past year, driven in part by the Covid-19 pandemic, and while lower gas prices were providing some relief to manufacturers and other gas users on Australia’s east coast, prices were still higher than export parity.

The ACCC stated that while east coast gas supply was expected to meet demand during 2021, a shortfall of as much as 30 PJ may arise by 2024 in the southern states, while the broader east coast gas market faced the risk of a shortfall in 2026.

“The fall in gas prices is very welcome news for major gas users who, like many other Australian businesses, have faced enormous challenges in responding to the Covid-19 pandemic,” ACCC chairperson Rod Sims said.

“It is concerning that the risk of a gas supply shortfall in Australia’s southern states continues, despite this having been a looming issue for some time.

“There are new sources of supply and related infrastructure that could be brought on line to avoid a potential shortfall. It is crucial that investment decisions are made now to ensure there’s enough supply, and to provide downward pressure on future price rises,” Sims said.

Federal Resources Minister Keith Pitt noted that gas exporters are likely to produce 21 PJ of gas above their contractual requirements in 2021. Under the government’s renewed Heads of Agreement, this gas must be first offered to the domestic market on competitive market terms.  

Pitt said developing Australia’s gas reserves would help secure its energy future as well as deliver further economic benefits.

“Investing in gas projects is an investment in Australia’s future. We’re unlocking Australia’s vast gas supplies to meet our domestic gas demand well into the future while creating thousands of jobs around the country, mainly in regional areas.”

Minister for Energy and Emissions Reduction Angus Taylor said while the ACCC’s pricing strategy findings were of concern, gas would continue to fuel Australia’s recovery from the Covid-19 pandemic.

“The gas price reductions we saw in 2020 have been a welcome relief to Australian households and businesses. However, the ACCC findings that Australian gas users are not always receiving internationally competitive prices is not acceptable” Taylor said.

“Improving the competitiveness and transparency of the gas market through our comprehensive plan will benefit the entire Australian supply chain – from the supplier to the stovetop. All industry players need to work together with us to achieve this goal.”

The Australian Petroleum Production and Exploration Association (Appea) said on Tuesday that in the face of the Covid-19 pandemic and challenging market conditions the oil and gas industry had continued to provide reliable and secure supplies of gas to the east coast domestic market, and this would continue.

CEO Andrew McConville noted that recent market releases by major Australian oil and gas companies had shown realised prices in the domestic gas market remain well below liquefied natural gas (LNG) prices received by those same companies in their major export markets.

“The industry will welcome the opportunity to again discuss the differences between spot gas markets and longer-term contract markets, and the factors that mean different price outcomes are observed in those markets,” said McConville.

“As the ACCC has itself noted on numerous occasions, the LNG spot netback price is not ‘setting a level of gas prices in the east coast gas market or any other market in Australia’.

“It is also the case that spot LNG cargoes are priced differently from longer-term LNG contracts, with prices realised by Australian LNG exporters significantly higher than domestic gas prices.”

McConville stressed that Australian gas companies operated in a competitive market.

“As such they have their own pricing strategies and do not cooperate with their competitors or coordinate pricing strategies. All companies operate in a manner that is consistent with the anticompetitive provisions of the ACCC’s Competition and Consumer Act 2010,” he said.

“The Australian oil and gas industry operates with a high level of transparency and oversight, with gas spot prices published continuously by market operator Australian Energy Market Operator for all major city hubs on the east coast.

“LNG spot prices are also published by myriad global agencies and media groups, and ACCC’s netback pricing reports have since October 2018 provided information required for future LNG pricing.”