The competition regulator today made its most strident call for onshore gas expansion in South East Australia to date.
The Australian Competition and Consumer Commission issued a statement today, timed to coincide with the Domestic Gas Outlook Conference, which said more gas was needed to end the price squeeze on wholesale gas prices which is gripping industrial users.
Victoria and Tasmania have imposed moratoria on gas exploration and NSW has wound back exploration permits to a small patch of active tenements.
ACCC chairman Rod Sims said the supply shortfall in southern Australia meant gas produced in Queensland will be piped down, which added transport costs to wholesale prices and weakened buyers’ bargaining power.
“We are at a critical point for government policy making in addressing the issues faced in the east coast gas market,” Mr Sims said.
His advocacy will be controversial.
Community groups in southern states oppose onshore gas on environmental grounds, with a longstanding popular movement in a section of the farm community.
Most recently controversy has flared around Coonamble, NSW.
Today the Country Women’s Association of NSW spoke out against gas development.
“The CWA of NSW supports a ban on unconventional gas exploration, extraction and production,” said state president Annette Turner.
“CWA policy on this matter is clear and unequivocal. After years of calling for moratoriums, increased regulation and better information, our members clearly told us at our conference last year that that enough was enough.”
The ACCC has said using Queensland gas in southern states add between to $2 a gigajoule $4/GJ to the wholesale price.
Many industrial users, including agricultural industries, are struggling under the burden of high gas prices.
Speaking at the conference in Sydeny today on Mr Sims behalf, ACCC gas inquiry unit director Nicole Ross said the east coast gas market is “incredibly tight” and is not functioning as it should.
Existing southern supplies were dwindling and new sources are urgently needed.
“The ACCC will not weigh into the debate about the environmental issues surrounding these restrictions, but 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,” Ms Ross said.
Last year, the ACCC fielded reports from large industrial users who were receiving offers for 2018 wholesale contracts at $8 to $12/GJ.
“While this represented a reduction in the offers that we were seeing earlier in 2017, of up to around $16, these prices are still higher than we would expect to see in a well-functioning and competitive market,” Ms Roiss said.
She noted smaller industrial have less bargaining power and face higher prices than larger users.
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