Australia’s domestic gas supplies are increasing, but prices are still too expensive.
Those are the key findings of the latest report by the Australian Competition and Consumer Commission (ACCC) into the nation’s gas market.
In September, the Australian Energy Market Operator (AEMO) and the ACCC warned the east coast of Australia would face a gas shortfall in the first half of 2018 if gas producers failed to boost supply.
The Federal Government threatened to impose export restrictions on producers to ensure Australian consumers were prioritised before international markets.
ACCC chairman Rod Sims said the gas supply shortage had had “a catastrophic effect on the Australian economy”.
“It’s meant that gas prices have gone up a lot — doubled, tripled, quadrupled for some businesses and some consumers,” he told AM.
“And it meant that some companies just could not get gas, there just wasn’t enough gas.”
But Mr Sims said the deal struck between the Federal Government and gas producers two months ago had already been felt, even though prices were still above the levels the ACCC wanted to see.
“What we’ve seen is LNG producers have reduced exports to provide more gas to the domestic market, and that has overcome the shortfall, and that has seen prices for many companies fall from around $16 [per gigajoule] to around $8 to $12,” he said.
“So we no longer have a shortfall and prices have come off somewhat.
“It’s certainly a better picture, the market still has some problems, but it’s a much better picture now than we had a couple of months ago.”
The Australian Industry Group’s Tennant Reed warned against celebrating too soon, suggesting businesses were still facing high gas costs.
“Rather than getting absolutely hammered on their next contract, they will instead be pained, or at best peeved.”
Price drop not flowing through to regional Australia yet
Chief executive of the Australian Meat Industry Council Patrick Hutchinson was encouraged by the findings.
However he argued his members were yet to see their power bills drop in regional Australia.
“It is a massive issue that is showing no signs of abatement,” Mr Hutchinson told AM.
“It may well be manufacturing may be getting an increase in gas, or opportunities for gas. But unfortunately that may be starting at metro first.”
In a swipe at the Federal Government’s priorities, Mr Hutchinson sought to remind the Coalition that his sector was among those most exposed to power prices.
He argued more attention was being focused on recent by-elections in key seats than on the plight of his members.
“How about you get out there and see what’s happening in rural and regional Australia?”
Coalition still pushing for gas moratoriums to be dropped
The ACCC report also warned that the southern states were still having to rely on Queensland gas production to meet demand.
Unsurprisingly, the Federal Energy Minister took a swipe at some states’ opposition to gas exploration in spruiking the ACCC’s findings.
“We are encouraging the states to undertake geological surveys of the resources that they have, and to provide more incentives to the landowners and to the farmers to develop these gas fields,” Josh Frydenberg told AM.
“The experience overseas, particularly in the United States, is if the landowners can get more of a reward for the development of gas on their land, then they will do it, and you will overcome some of the objections that we’ve seen to date.”
Mr Frydenberg said it was the Government’s intention to keep the gas supply deal with producers in place.
Australian Competition and Consumer Commission (ACCC) Gas Inquiry 2017-2020 Interim Report, December 2017