East Coast gas “problem not fixed”

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 18 Dec 2017   Posted by admin

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Santos GLNG. Image: Santos.


BY ELIZABETH FABRI


THE East Coast gas market is showing signs of improvement with increased domestic supply and lower wholesale prices, but is still not functioning correctly, according to Australia’s consumer watchdog.


In a second report to the Government as part of a three year inquiry into the gas market, the Australian Competition and Consumer Commission (ACCC) said the East Coast was no longer at high risk of a supply shortfall through 2018 (as forecast in ACCC’s September report), after Government intervention drove some of the nation’s biggest producers to divert gas to domestic markets.

However, it noted prices remained higher than they would be in a well-operating, competitive market.

While pressure had eased for large commercial and industrial users, with prices fetching for $8-12/GJ compared to $16/GJ in early 2017, the outlook for smaller commercial and industrial consumers “remained bleak”.

“Some smaller C&I users have told the ACCC that they still only have one retailer interested in supplying them, and others claim they continue to have no gas available,” the ACCC stated.

It also warned that while there is a lower likelihood of a supply shortfall in 2018 across the market overall, the southern States were still expected to consume more gas than they produced, bringing to light pipeline constraints in transporting gas south from QLD.


“The gas shortfall in the southern states can add at least $2/GJ and possibly up to $4/GJ to the prices paid by gas consumers in these states,” ACCC chairman Rod Sims said.


“The various restrictions to onshore gas exploration do have consequences.”

Federal Resources minister Matthew Canavan said despite the evident progress that has been made, the “problem’s not fixed”

“Obviously it’s a very complex market, but one of the issues we’ve got now is that our gas production is moving to the north; it’s moving to Queensland (it traditionally has come from the Bass Strait, since the 1960s – those fields are declining),” Mr Canavan said.

“Now, there’s sufficient gas there [QLD] in volume terms to meet our needs, however the problem is it’s a long way from the existing users of gas which are often concentrated around those areas in the Bass Strait and South Australia where there’s access to it, so they’ve got to take that gas a long way.

“We have issues in the pipeline market about access that we are progressing by establishing a new arbitration framework.

“That should bring more capacity available to people who want to transport gas long distances and that will help the final price, the final delivered price to people in southern markets.”

The ACCC said it would continue to monitor the operation of the gas market, with its third report due in March 2018.

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