This is the January 2021 interim report of the Australian Competition and Consumer Commission's (ACCC's) inquiry into gas supply in Australia (the Inquiry).

The COVID-19 pandemic appears to have had only a minimal effect on the supply of gas in the east coast in 2020. While the low oil and LNG spot prices appear to have ameliorated some of the impacts of the pandemic in 2020, they have also increased the supply risks facing the gas market over the medium term.

Record low oil and gas prices observed over 2020, due to existing market trends and exacerbated by the pandemic, have brought some welcome price relief for commercial and industrial (C&I) users in the domestic east coast gas market. Doubts about how long these improved conditions can last, however, are weighing heavily on the minds of C&I users.

C&I users have reported improved market conditions. This came in the form of lower price offers and contracts for 2021–22 and, in some cases, improved responsiveness of gas suppliers, including greater flexibility in contract terms for a few users.

Our examination of gas price information is consistent with the reports of C&I users. Prices offered for 2021 supply by both producers and retailers (under gas supply agreements (GSAs)) have declined noticeably from $8–14 per gigajoule over the second half of 2019 to $6–8 per gigajoule by mid-2020. Similarly, average prices in GSAs entered into between C&I users and gas suppliers (both producers and retailers) have gone from just under $10 per gigajoule to the lowest they have been since 2016, slightly under $8 per gigajoule. However, domestic offer and GSA prices remain above export parity prices although to a lesser extent than we reported in July 2020.

The sharp decline in GSA prices in the east coast domestic market likely reflects, in part, the substantially lower gas prices that have been observed over 2020 in international LNG spot markets. The prices in offers and GSAs for 2021 supply also likely reflect the expectations (at the time these offers were made and GSAs executed) for continued low LNG and oil prices over 2021, including the impact of these price expectations on quantities of gas Australian LNG exporters would supply to international customers and into the domestic east coast gas market.


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