Tight global gas markets have reinforced the importance of continued investment in Australia’s gas resources to avoid the supply shortfalls and high prices being experienced internationally.
The Australian Competition and Consumer Commission’s (ACCC) latest Gas Inquiry Interim Report found that while domestic gas contract prices rose slightly between March and August 2021, Australia avoided the up to 230 per cent price increases seen overseas in the Asian LNG spot market.
The ACCC notes that timely investment and advancement of gas basins and infrastructure is critical to avoid an earlier than previously forecast gas supply shortfall in the south.
Southern states are likely to be reliant on gas from the north to avoid a shortfall on certain days later this year. This is predominately due to a reduction in forecast production in the Gippsland and Cooper Basins.
Consistent with the Government’s 2021 National Gas Infrastructure Plan, the ACCC notes that over the long term the development of basins such as the Beetaloo (NT), North Bowen (QLD), Galilee (QLD) and Gunnedah (Narrabri, NSW) would help to alleviate the shortfall.
The report also notes that although low emissions alternatives may assist supply in the medium to longer term, technologies like hydrogen will not assist any sooner than 2030.
Treasurer Josh Frydenberg said the ACCC acknowledged the Government’s measures to bring forward new domestic supply and to protect Australian households and businesses from the kinds of price and supply issues being experienced in other countries.
“The ongoing supply of affordable gas is crucial to helping Australia’s economy as it rebounds from the impact of the COVID pandemic,” Treasurer Frydenberg said.
Minister for Industry, Energy and Emissions Reduction Angus Taylor said domestic gas contract prices remained internationally competitive at around $6.70–$9.60 a gigajoule, while Asian LNG spot prices increased steeply over the reporting period.
“Australia has been fortunate to escape the devastating price impacts seen in Europe due to their energy crisis. Accelerating the gas-fired recovery is essential to ensure this does not happen here,” Minister Taylor said.
“While the report notes some positive signs for infrastructure investment in expanding south-bound capacity, the Government will continue to assist industry where needed through our Future Gas Infrastructure Investment Framework.
“It is clear from the ACCC that underinvestment in the gas sector cannot continue.
“This report is a stark warning that we cannot allow activism to slow gas projects. Without unlocking gas, we will feel the price pressures being experienced overseas.
“A Labor-Green partnership is a real threat to future gas supplies and gas prices.”
The ACCC also notes that Government-led initiatives such as the Energy Ministers’ pipeline reforms, and the voluntary Code of Conduct will help to constrain market power, improve price transparency and provide benefits for gas users.
Minister for Resources and Water Keith Pitt said the interim report highlighted the need to further develop Australia’s vast gas resources, with the ACCC flagging a tightening east coast domestic supply-demand balance in 2022.
“The Government recognises the importance of regularly looking for new opportunities to improve gas supply in the east coast market,” Minister Pitt said.
“This Government understands the importance of opening gas developments in Australia. We have committed to release new Strategic Basin Plans to unlock supply. Plans for the Beetaloo Basin and the Galilee and North Bowen basins have been released, and we are working on the Cooper and Adavale Basins’ Plan.
“The ACCC notes the uncertain supply outlook emphasises the importance of the Heads of Agreement signed with major producers, which continues to ensure competitive gas supply into the domestic market. The ACCC will continue to closely monitor LNG producer compliance with the Heads of Agreement.”
“I also fully endorse the ACCC’s strong encouragement of state governments to not adopt blanket moratoria or bans on gas development – these reckless bans cannot come at the cost of our energy security.
“It should be a concern to all Australians that this is exactly what The Greens have proposed in a Bill put before Parliament as part of their deal to support Labor if they hold the balance of power in a hung parliament.”
The ACCC report is focussed on the east coast gas market and is available on the ACCC website.