Report

Gas inquiry 2017-2020: interim report - December 2017

13 Dec 2017
Description

This is the second interim report of the Australian Competition and Consumer Commission’s (ACCC) inquiry (‘the Inquiry’) into gas supply arrangements in Australia. The ACCC is focussing on the operation of the East Coast Gas Market, where there are continuing immediate and longer-term concerns.

In the September 2017 report, the ACCC reported on the supply-demand outlook for 2018. The ACCC found that there was likely to be a substantial gas supply shortfall in 2018 and that commercial and industrial (C&I) users were experiencing difficulties in obtaining gas supply for 2018. In the first part of 2017 in particular, C&I users had few suppliers offering them gas for supply in 2018. Where gas was offered, it was generally at prices well above the ACCC’s estimates of benchmark prices. The ACCC also reported that there was insufficient participation during this period by the Queensland liquefied natural gas (LNG) producers in offering gas to the domestic market for supply in 2018, given that they were collectively forecasting significant LNG export spot sales for 2018.

On 3 October 2017, the Australian Government reached a Heads of Agreement with the LNG producers. In the Heads of Agreement, the Government acknowledged that the east coast LNG industry is a net supplier to the domestic market. However, to ensure the security of supply of gas to Australian users, the Government obtained an agreement from the LNG producers that they would offer sufficient gas to the domestic market to meet the expected supply shortfall in 2018 and 2019 and that those offers would be made on reasonable terms.

Information obtained by the ACCC since the September 2017 report shows that LNG producers have made significant additional quantities available to the domestic market over the past few months and there have been some improvements in the availability of gas and prices offered to gas users in the East Coast Gas Market. However, the East Coast Gas Market is still not functioning effectively and domestic prices are still in excess of the ACCC’s estimates of benchmark prices.

From the longer-term perspective, the East Coast Gas Market is being transformed by significant changes to the gas supply and demand profile, the role and use of infrastructure, and domestic gas prices. These changes are altering the operation of the East Coast Gas Market and the transition has been, and likely will continue to be, difficult for many participants.

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License Type: 
CC BY
Published year only: 
2017
96
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