Crunch time as gas prices soar to record lev­els


East coast gas prices surged back to record lev­els late last year, prompt­ing a fresh warn­ing that heavy in­dus­try and large man­u­fac­tur­ers face re­newed pres­sure as they strug­gle to strike more af­ford­able en­ergy tar­iffs.

Do­mes­tic gas prices jumped by up to 51 per cent in Mel­bourne last month, com­pared with the pre­vi­ous year, with Syd­ney ris­ing 45 per cent, Bris­bane climb­ing 32 per cent and Ade­laide 31 per cent higher, data from con­sul­tancy En­er­gyQuest shows.

Users in the south­east­ern states are still pay­ing up to three times his­tor­i­cal prices of $3-$4 a gi­ga­joule, with prices at ei­ther record or near-record lev­els for all ma­jor gas mar­kets in the last three months of 2018, ac­cord­ing to ad­vi­sory firm En­ergy Edge.

Prices av­er­aged $10 a gi­ga­joule or above in the last quar­ter of 2018 com­pared with an av­er­age of $9 a gi­ga­joule for the first three months of last year, ac­cord­ing to En­ergy Edge.

Still, that may mark some sort of progress, given the Aus­tralian Com­pe­ti­tion & Con­sumer Com­mis­sion had fore­cast prices to top $15 a gi­ga­joule this sum­mer.

The Aus­tralian In­dus­try Group, which rep­re­sents 60,000 man­u­fac­tur­ing and in­dus­trial busi­nesses, said the gas crunch con­tin­ued to threaten the vi­a­bil­ity of big users, which are see­ing lit­tle let-up in their ne­go­ti­a­tions with en­ergy pro­duc­ers.

“In­dus­trial users still need to find lower prices,” Ai Group’s chief pol­icy ad­viser, Ten­nant Reed, said.

“Many re­main in dif­fi­cult ne­go­ti­a­tions with do­mes­tic sup­pli­ers and from what I’ve heard there is a dis­cus­sion to be had but the price is very dif­fi­cult.”

Five com­pet­ing LNG im­port projects have been pro­posed for the east coast to ar­rest a short­fall of sup­plies for do­mes­tic users as cheap vol­umes from tra­di­tional sources such as Bass Strait be­gin to de­cline.

At the same time, new sources of pro­duc­tion, in­clud­ing Queens­land’s coal-seam gas de­posits, are be­ing largely shipped to cus­tomers in Asia, ex­pos­ing the east coast mar­ket to in­ter­na­tional pric­ing.

The link­age be­tween the east coast and in­ter­na­tional LNG prices took shape after Queens­land’s three ex­port projects helmed by Ori­gin En­ergy, San­tos and Shell started ship­ping lo­cal gas to Asian cus­tomers over the past few years, which ef­fec­tively tied the two mar­kets.

“It feels that the in­ter­na­tional price link­ages are caus­ing the do­mes­tic prices to fol­low,” En­ergy Edge man­ag­ing direc­tor Josh Stabler said. “Gov­ern­ment in­ter­ven­tion has a bit of self-ful­fil­ment to it. Reg­u­la­tors dis­cuss the in­ter­na­tional link­ages and now the mar­ket grav­i­tates to it.”

The most re­al­is­tic way to cut prices — rather than build­ing Aus­tralia’s first LNG im­port ter­mi­nals — is to ratchet up lo­cally pro­duced gas in the south­ern states to help snap the cost of pay­ing for sup­plies piped down from Queens­land or im­ported from over­seas, ACCC boss Rod Sims said last year.

San­tos, one of Aus­tralia’s largest gas pro­duc­ers and op­er­a­tor of the GLNG ex­port plant in Queens­land, said plans for the na­tion to im­port LNG would trig­ger a price hike and sup­ply squeeze, en­sur­ing for­eign op­er­a­tors “have a gun to the head” of lo­cal man­u­fac­tur­ers. It wants to de­velop its Narrabri CSG pro­ject in NSW to boost sup­ply and lower prices rather than re­ply­ing on planned im­port plants.

Re­sources Min­is­ter Matt Cana­van said Aus­tralia needed to de­velop more of its own hy­dro­car­bon re­serves.

“To get lower prices we need more sup­ply of gas. That’s been the con­sis­tent ad­vice from the ACCC and other ad­vis­ers to the gov­ern­ment on these mat­ters,’’ he said.

Op­po­si­tion en­ergy spokesman Mark But­ler said the gov­ern­ment had failed to de­liver af­ford­able sup­pli­ers to lo­cal users de­spite declar­ing the gas cri­sis was over.

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