East coast gas prices have eased, taking some of the pressure of large commercial and industrial customers, but the opaque gas market is still dysfunctional, according to the Australian Consumer and Competition Commission.
Wholesale gas prices have fallen from a peak of $20 a gigajoule in early 2017 to sit at $8-$12GJ, with a prices expected to remain stable into the near future.
In the competition watchdog’s third gas market outlook, released today, ACCC chairman Rod Sims said gas users can’t see how international prices are driving domestic gas prices.
He wants to arm them with more information so they can bargain down domestic contract prices.
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The ACCC plans to publish the netback price of liquefied natural gas exports, which are flowing to Asia from the Gladstone's LNG hub.
“At the moment gas users haven’t got enough information to assess how international prices are driving domestic gas prices,” Mr Sims said.
The netback price is calculated by taking the price for LNG delivered to an importer and subtracting (‘netting back’) the costs of converting gas to LNG and shipping.
By publishing the netback prices, domestic users could compare their prices to the deals Australian gas exporters are doing with offshore customers.
“We believe that publishing LNG netback prices is an important step towards improving gas price transparency to improve the competitive bargaining process.”
Prices in the oversupplied international market are so good two Australian companies are planning to buy surplus gas out of Gladstone back from Asian importers and ship it back to the domestic market.
LNG has been selling for $5 to $6GJ, which means local prices provide a $2 to $6GJ margin, enough to cover international shipping.
Before east coast exports began in December 2014, the long term average price was $3 to $4 from long standing operations in Bass Strait, Moomba in South Australia and the relatively new Queensland gas fields.
When Queensland’s Curtis Island export hub linked the east coast supply to the international market and prices more than doubled overnight.
The ACCC said prices had fallen from the 2017 peak since the commitment made by Queensland LNG producers, under a Heads of Agreement with the Turnbull Government, to make additional quantities of gas available to the domestic market, and the ACCC monitoring and “close attention to specific deals” may have helped gas customers as well.
But despite the recent improvements in the wholesale domestic gas market, industrial users are still feeling the pinch.
Australian Food and Grocery Council chief executive Tanya Barden said high energy prices could have “dire consequences” for businesses and workers across the $127 billion food sector,
“Many food and grocery manufacturers are due to renew their electricity contracts and are concerned about their viability in the next couple of years,” Ms Barden said.
The convulsions in energy policy over recent years has hurt investment, Ms Barden said.
“Food and grocery companies will only invest in Australia if they can see a stable policy framework for driving reliable and cost effective power supplies.
“To achieve this there is a need for ongoing reforms that will address other shortfalls in the energy market, including improving energy retail competition, transactional behaviour and gas availability and pricing.”