Gas industry heads warn that high prices are here to stay

7 Mar 19

The Australian Domestic Gas Outlook conference held in Sydney today hasn’t given great news to struggling businesses hoping for some relief from high gas prices.

At the Australian Domestic Gas Outlook Conference in Sydney on Wednesday, industry leaders acknowledged intervention had helped increase domestic supply but warned that foreign investment, which is needed to develop new sources of gas, could be scared away by aggressive government interference. Johanna Boothey, commercial head of ExxonMobil Australia, BHP’s head of energy in Australia Sam Bartholomaeus and chief executives of smaller gas producers rejected charges from some regulators and gas buyers that they have been poorly treating local customers, which are struggling with prices that have surged three-fold or more in the past five years.

Instead, the leaders say federal government threats of gas export caps through the Australian Domestic Gas Security Mechanism and state bans in Victoria and NSW for onshore gas exploration and production are to blame for the ongoing high prices, scaring off potential investors and reducing availability of new reserves.

But junior east coast producers Cooper Energy and Senex Energy said their new projects would not be going ahead without higher gas prices.

Cooper chief executive David Maxwell said the company’s $605 million Sole gas project, due to start commercial sales in July, would have stayed undeveloped without an increase in east coast prices.

“People need to understand that the low cost gas has gone,” said Cooper chief executive David Maxwell, adding that Cooper’s $605 million Sole gas project, due to start up mid-year, only became economic for development in 2015-16 after being discovered in 1973.

Australian Pipelines and Gas Association chief Steve Davies also supported intervention but said it must be implemented properly, especially with state and federal elections on the horizon.

“I think interventions are necessary, the real challenge is how do we find the right kind of intervention,” Mr Davies said.

“The political timetable operates very differently to the industry timetable and that’s created many of the problems we’re experiencing today.”

LNG Data from the ACCC