The ACCC‘s newest gas inquiry report predicts a supply shortfall of 30 petajoules (PJ) in Australia’s east coast gas market this year if LNG producers ship all of their uncontracted gas. However, LNG producers have enough uncontracted gas to cover any domestic shortfall.
In a statement, the ACCC said the report covers a period when domestic gas prices were at an all-time high, prompting the Australian Government to impose a temporary price ceiling in late December 2022. The report’s data only runs up to early December 2022, so it still needs to reveal the impact of the price cap, according to the ACCC.
In July 2022, the ACCC forecasted a 56 PJ supply gap in 2023. According to the report, the outlook has improved, with Australia’s east coast expected to produce 1,983 PJ of gas in 2023, compared to the demand of 2,013 PJ. Under long-term contracts, the three LNG operations in Queensland are expected to export 1,296 PJ of that gas overseas.
The LNG producers are also projected to produce 146 PJ more than is required to meet contractual commitments, 30 PJ of which is required domestically to avoid a gap.
“The east coast gas supply forecast for 2023 has improved, but the outlook remains uncertain as the LNG producers haven’t yet committed sufficient volume under firm contracts to address the risk of a domestic shortfall,” ACCC Chair Gina Cass-Gottlieb said.
The report demonstrates that since 2021, the three LNG producers have been net gas withdrawers from the domestic market, purchasing more gas from other gas producers than they can deliver to domestic clients.
According to the ACCC, gas consumption in the southern states is anticipated to outpace gas output from southern state gas sources by 52 PJ, or about 12% of anticipated southern demand. While the most recent data points to an increase in anticipated gas output from the Gippsland Basin in 2023, this is offset by a decrease in anticipated production from the Otway Basin due to surprisingly subpar gas well performance.
Gas prices hit record highs
The ACCC said the global energy crisis had raised global demand for LNG, driving prices to all-time highs in the middle of last year. Because LNG exporters and their associates control about 90% of proven and probable east coast gas reserves, the ACCC stated that substantially higher worldwide prices had increased Australia’s local wholesale gas prices.
The report demonstrated that prices for supply on the east coast in 2023 dramatically jumped last year and reached the highest levels the ACCC has seen in the nearly six years of its gas inquiry.
According to the ACCC, the average price of supply offers from gas producers to commercial and industrial consumers climbed by 88% between March and August 2022, to $19.77 per gigajoule (GJ), compared to the preceding six-month period. However, the ACCC added while many higher-priced supply bids were rejected by customers last year, the average price of supply contracts signed by producers climbed by 30% between March and August 2022, to $12.38 per GJ, compared to the previous six-month period.
“The average price of gas being offered to Australia’s commercial and industrial gas users around the middle of last year was almost double what it was at the start of 2022,” Cass-Gottlieb said.
The Commonwealth Government imposed a temporary price cap of $12 per GJ for gas sold and supplied under Gas Sales Agreements by gas producers and their affiliates in the east coast and Northern Territory markets in response to concerns regarding the effects of the global energy crisis on Australia’s gas markets in December. Although the price cap does not apply to the sale of gas for export, the ACCC will enforce adherence to it.
The ACCC added that the Government is also seeking input on its plan to enact a mandatory gas code of conduct, which will include a clause requiring appropriate pricing from gas producers and consumers when negotiating supply agreements.
“Our role monitoring and reporting on the market will be particularly important this year as it will provide an information base for assessing co
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