"The commitments that the gas exporters are giving to domestic supply are positive, but it will take time to gauge their effectiveness. Supply into the gas market during extreme peaks is critical for a secure electricity system, but it is the chronic tightness of the gas market that is driving contract prices to extremes. The test for the gas exporters will be whether they can stabilise the domestic contract market, not just tip some gas into the spot market from time to time. The proposed gas industry commission will also help build transparency over time.
"Today's meeting came at a time when we can confirm that Australia is now paying the highest gas prices in the developed world.
"The soaring price of Australian gas has now reached record levels, taking Australia from having a competitive advantage in low gas prices, to the point where even Japanese customers are able to buy gas on spot markets for well below the prices being offered to Australian customers today.
"Current spot market prices for the USA, Europe and Japan are (in Australian dollars):
- USA - $4/GJ (Henry Hub)
- Europe - $8.40/GJ (World Bank)
- Japan - $11/GJ (METI report of spot LNG landed)
"Meanwhile we are seeing in Eastern Australia that gas is being offered for new contracts at $16-22/GJ in the short term, and $12.50+ for 3 years. Prices seem to be headed up from here. This is economically unsustainable and will drive investment and jobs offshore.
"Immediate action is needed. New supply will be needed from onshore gas resources in New South Wales, Victoria and the Northern Territory, but that will take years to deliver. In the meantime the Government is rightly moving to encourage commercial arrangements that swap gas from the export market to domestic supply. Liquid global markets in LNG can help exporters meet their commitments. The only alternatives in the near term are catastrophic demand destruction or sovereign risk intervention," Innes Willox said.
Media Enquiries: Tony Melville – 0419 190 347