In a new report,the Australian Competition and Consumer Commission (ACCC) last week declared a 30-petajoule gas shortfall was still possible later this year,even though market conditions had improved since July when it had forecast a 56-petajoule gap.
East-coast gas exporters face fines of $50 million if they breach price caps on sales of wholesale gas to Australian buyers.James Davies
The watchdog said Queensland’s LNG giants could do more to plug any shortfall,finding they had ample uncontracted gas available to sell locally instead of being exported,but they had not yet committed sufficient volumes under “firm contracts” to address the risk.
A spokesperson for Energy Minister Chris Bowen said the so-called “heads of agreement” struck between the Albanese government and LNG producers last year had included a promise that the exporters would offer 157 petajoules for sale in the domestic market in 2023.
“LNG producers are expected to have sufficient uncontracted gas to meet uncontracted domestic demand this year,” the spokesperson said.
“There is clearly sufficient supply available in the market,but not all the available gas is being offered.”
Andrew Richards,Energy Users Association of Australia
Representatives for industrial gas buyers,which rely on the fuel for energy or as a feedstock in manufacturing processes,on Monday said the ACCC’s warnings revealed a “dysfunctional” domestic gas market despite LNG giants’ assurances there was no risk of shortages.
“There is clearly sufficient supply available in the market,but not all the available gas is being offered,” said Andrew Richards of the Energy Users Association of Australia,whose membership includes manufacturing giants such as Incitec Pivot,Qenos and Brickworks.
Some east-coast gas producers suspended talks on striking new fixed-price supply deals in December as they paused to assess the implications of the government’s emergency market intervention. The government imposed a $12-a-gigajoule cap on wholesale domestic gas sales for 12 months and will introduce a mandatory code of conduct compelling gas to be sold at “reasonable” contract prices thereafter. Before the government decided to intervene,east-coast gas bills had been forecast to surge by more than 40 per cent by 2024,threatening to push prices to potentially unaffordable levels for many homes and businesses.
“I think a few of them[LNG exporters] were a bit wary– they were waiting to see what the new rules were,” Richards said. “But having said that,they should be out there offering gas.”
Global energy major Shell last week ended the freeze on new contracts,notifying customers it would make an additional 8 petajoules of wholesale gas supply available for 2023 via its Queensland gas business,QGC,in compliance with the government’s $12 price cap.
AGL,one of the largest Australian gas retailers,said it believed gas shortfalls were likely in 2023 and was considering the terms of Shell’s offer to sell additional supplies.
“With a decline in domestic production,we are also expecting a shortfall in the gas market,” a company spokesperson said.
“AGL is currently reviewing the terms of the expressions-of-interest process conducted by Shell/QGC for the sale of $12-a-gigajule gas,” AGL’s spokesperson said.
The Australian Petroleum Production and Exploration Association (APPEA),an industry group representing large gas producers,said the ACCC’s report showed the need to develop more sources of supply,especially in Australia’s southern states,where years of restrictive policies and onshore drilling moratoriums have stood on the way of new gas projects to replace rapidly diminishing output from legacy gas fields in Bass Strait and elsewhere.
“The report ... shows demand for gas in southern states is expected to exceed production by 52 petajoules from gas sources located in southern states,reinforcing the need for Victoria and NSW to develop their own resources,rather than rely on Queensland to do all the heavy lifting” APPEA chief executive Samantha McCulloch said.
The Energy Users Association of Australia said the report had reaffirmed the need for the emergency price cap and a mandatory code of conduct for the gas industry to ensure a “fair and balanced domestic gas market for all participants.”
“The ACCC report identifies that the vast majority of contracted and uncontracted gas reserves are in a cost range of between $5 a gigajoule to $10 a gigajoule,meaning even with an emergency price cap of $12 a gigajoule,most gas will be sold at a healthy margin and no gas will be sold at a loss,” Richards said.
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