Impending gas shortage pain delayed
AUSTRALIA has enough gas to avert a supply crunch next year but it is unlikely to be cheap enough to keep every manufacturer in business, the competition watchdog warns.
More supply is needed in states such as Victoria and NSW if prices are to fall, the Australian Competition and Consumer Commission says.
The findings are contained in the ACCC’s latest report into the gas market, released yesterday.
It found gas prices had “eased considerably” since the “extremes” reported last year, but remained two to three times higher than historical levels.
“Prices, and the market generally, are very challenging for gas users who must constantly consider their investment plans, employment levels and even in some cases their continued operation,” ACCC chief Rod Sims said. “The reality is that more gas is required to lower prices to users … to lower prices in the southern states, lower-cost gas must be produced in the southern states.”
The ACCC warned last year the east coast faced a gas shortfall of up to 108 petajoules this year. A single petajoule is enough to supply a large industrial user, or the residential needs of a medium-size city for a year.
Manufacturers such as chemicals and fertiliser makers have found it increasingly diffi- cult to find competitively priced gas as the nation has become a major exporter and bans on onshore development have been introduced in states such as Victoria.
The threat of federal restrictions on exports and the prospect of import terminals being built has prompted major producers to direct more production into the east coast market.
The volume of gas forecast for electricity generation has also fallen.
The ACCC yesterday said its market analysis showed there would likely be sufficient gas next year to meet demand, citing increased supply and lower use by power generators.
Gas prices for industrial users had eased from a peak of more than $20 a gigajoule early last year to range between $8 and $11 a gigajoule, the ACCC said.
Mr Sims welcomed the fall in gas prices, but warned heavy users of gas were still facing highly challenging conditions.
“Gas production costs are increasing and gas prices in the east coast market are now shaped by international LNG prices, meaning that domestic prices are unlikely to return to historic levels,” he said.
Australian Petroleum Production and Exploration Association chief Malcolm Roberts said the ACCC report should remove any lingering concerns about the possibility of a supply shortfall this year.