26 September 2023

Gas report fuels supply warning

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A report from the Australian Competition and Consumer Commission (ACCC) has found that east coast domestic gas prices remained too high and it warned that future supply was “uncertain”.

Chairman of the ACCC, Rod Sims said the Commission’s Gas Inquiry 2017-25 Interim Report showed that while the supply outlook for 2020 had improved slightly since July last year, beyond 2020 there was significant uncertainty about whether future demand could be met.

“Southern states risk facing a shortfall in the medium term unless there is more exploration and development in the south, or new infrastructure to bring more supply to southern states,” Mr Sims said.

“We continue to urge State and Territory governments to assess individual gas development applications on a case-by-case basis,” he said.

“We also suggest they actively manage tenements to prevent ‘warehousing’ of gas, and that they coordinate the development of pipeline and storage infrastructure to avoid unnecessary duplication.”

The report found that producer price offers were almost 25 per cent above expected 2020 netback prices.

“The recent significant divergence between the netback prices and the prices offered is a concern for the ACCC and in 2020 we intend to now delve much deeper into the reasons why this is occurring,” Mr Sims said.

“Indeed, average netback prices expected for 2020 have been under $7/GJ since November 2019, which is well below prices being offered to domestic buyers.”

“We have been watching prices closely and have observed instances where prices offered have included a fixed price component, on top of an LNG spot price linked component,” Mr Sims said.

He said the ACCC’s next interim report would be provided to the Treasurer in June.

The Commission’s 142-page interim report can be accessed at this PS News link.

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