Eastern Oz Gas Above Asian Netback
Australia’s east coast gas market remains “incredibly tight” and the region’s wholesale prices are generally still higher than Asian LNG netback prices, the country’s competition watchdog said February 28.
“Across the east coast, wholesale gas prices remain generally higher than the Asian LNG spot netback prices and in the southern states in particular they are potentially [A]$2-4/GJ [$1.55-4.1/GJ] higher than would be likely to prevail if there was sufficient supply and diversity of suppliers in the south,” Nicole Ross, director at the ACCC’s gas inquiry unit, told the Australian Domestic Gas Outlook Conference in Sydney February 28.
The watchdog is aiming to increase the transparency of the market through publishing LNG netback prices and is consulting on an LNG spot netback series.
In September 2017, the LNG spot netback price was $6.00/mn Btu and in December it was $7.50/mn Btu and in February it was about $8.60/mn Btu, Ross said.
“It is uncertain where price expectations will move over the medium term, with some talk of a global LNG glut pushing prices down, but also reports of an increased demand in countries such as China and India,” she said, adding that Australian users should not pay more than indicated by reasonable benchmarks.
The ACCC said it will continue to shine a light, bringing more transparency to the market and investigating anti-competitive behaviour, but, unless it addresses the supply problem, Australia’s east coast will not be able to get to the competitive market that should be available for domestic users of gas.
“This is an issue that governments can act on now,” it said. It pointed to the lack of new onshore development caused by moratoria and other regulatory restrictions in New South Wales, Victoria and Tasmania as preventing or impeding production coming online.
ACCC chairman Rod Sims said: “A blanket ban which captures all potential projects, including conventional reserves, has consequences in the form of significantly higher gas costs for consumers and industrial users of gas in these states. It also acts as a brake on exploration and precludes industry even confirming gas reserves that... would improve consumer outcomes.”
“The ACCC will continue to advocate and recommend changes to laws where we think they are needed to improve the workings of the gas market,” he added. But the ACCC will not weigh into the debate about the environmental issues surround the restrictions.