The ACCC has released the second interim report into gas supply markets in Australia, focusing on the operation of the East Coast Gas Market where there are continuing immediate and longer-term concerns.
The report found that over the past few months, Queensland LNG producers have diverted significant quantities of gas into the domestic market. LNG producers have contracted 42 petajoules (PJ) of gas under long-term gas supply agreements (GSAs) to domestic buyers for supply in 2018 since the September 2017 report.
Collectively, LNG producers reduced their LNG export contract and LNG feed gas requirements for 2018 by 34 PJ and their planned LNG spot sales by 29 PJ. LNG projects are still forecasting to sell 34 PJ on the international LNG spot markets in 2018.
The bulk of the gas sales by LNG producers were to aggregators and retailers. While a substantial portion of this gas will be used to supply customers that were already contracted, the rest of the gas was used to enter into new GSAs with C&I users and gas powered generators (GPG). In total, aggregators and retailers have sold 32 PJ of gas for supply in 2018 since the September 2017 report.
As a result of additional supply being made available and a reduction in planned exports, there is now a lower likelihood of a supply shortfall in the East Coast Gas Market in 2018. However, the gas supply-demand balance in the market remains tight.
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,” Mr Sims said.
“And it meant that some companies just could not get gas, there just wasn’t enough gas.
“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.
“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.”