ACCC: lack of supply alternatives a clear factor affecting gas pricing

March 10th, 2016

This week’s  announcement of first gas from the giant Gorgon LNG project was enthusiastically celebrated by West Australian and national authorities, anticipating the enormous upswing in export income which will flow from the west coast LNG shipments.

Following the successful commissioning of the three projects  at Gladstone in Queensland, we now have major operating LNG platforms on our west and east coasts to add to that already established in the Northern Territory – an LNG trident which is predicted to see Australia become the world’s largest LNG exporter in the next 2 years or so.

But amid the congratulations for Chevron and its Gorgon partners,  one federal authority was simultaneously waving a flag of caution for Australia’s east coast gas supply.

Australian Consumer and Competition Commission (ACCC) Chairman Rod Sims said the successful completion of the export projects would not protect Australia’s domestic market from possible shortages on the east coast.

A ‘triple wammy’ had hit east coast markets, resulting in increased pressure on supply, Mr Sims told a conference in Sydney:   the first factor was increased demand for natural gas for the LNG export program, second was the crash in global oil prices (which directly affect gas prices) and third was a fall in regulatory certainty about natural gas exploration and development.

And what is the outcome of this negative confluence..?

“In this environment commercial and industrial gas users particularly have had a difficult time,” Mr Sims said.

Once again, Mr Sims put paid to the shrill claims of activists who declared that cost and supply pressure on east coast gas was a fantasy created by gas companies.

Thankfully, Mr Sims did not rely on the empty economic rhetoric put together by activists and the Australia Institute; he and his team have looked closely and consulted widely in their examination of the market.

And what is the stand-out point of what is needed to address this looming problem?   As the natural gas industry and ERIC have said numerous times in the past two years:  we need more gas supply, particularly for south-eastern Australia.

Mr Sims is due to deliver a report to Government on east coast gas supply issues within a month.

His comments this week suggest the report will be clear on the very negative effect on the east coast gas market should the supply problem not be solved.

Activists currently doing their utmost to thwart the development of the Santos project at Narrabri will no longer be able to justify their obstruction on the basis of weak eco-economic dogma.

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