Gas chief warns shortages, rising prices will sting households

AUSTRALIA has been warned of spiralling gas prices inflaming politics as a possible shortage means the nation will be chained to events in Japan and China.

Wood Mackenzie’s director for Asia- Pacific gas and LNG, Nicholas Browne, said consumers may be forced to pay even higher prices in coming years as a shortage could mean LNG from coal seam gas producers in Queensland was forced back into the domestic market.

Prices would rise to provide an incentive for producers to redirect gas. “Gas prices will rise. Expect the political climate to heat up further,” Mr Browne said.

“Unless significant new reserves are commercialised within five to seven years, the east coast market comprising the eastern and southern states of Queensland, NSW, Victoria and South Australia will be short of gas.”

Queensland had a system of domestic gas fields but NSW and Victoria had restrictions or moratoriums on coal seam gas development.

“The market will then need to draw on the massive CSG reserves of Queensland. However, these reserves are mostly dedicated to three LNG export projects focused on selling LNG to markets such as China and Japan,” he said.

“Producers will need to be incentivised to redirect gas domestically and as such need to receive the same value they can get from selling to north Asia. In effect a gas- short domestic market will need to compete with Asian buyers.”

Chinese attempts to clean up its air and Japanese summer heatwaves would directly affect east Australian gas prices and consumers.

“Utility bills will rise, squeezing disposable incomes,” he said.

“A risk of closures is likely to lead to more public pressure on the gas industry and government, leading to politicians stepping in ( again) to berate the industry and propose solutions.”