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Gas consumers hit by declining competition


Source: The Age

Consumers are paying the price for the significant disruption to the Australian gas market as exporters scramble to meet their export commitments, the national energy regulator has warned.

In its annual review of energy markets, the Australian Energy Regulator noted that distance from newly completed export projects in Queensland had been expected to insulate the Victorian, and to a lesser extent, NSW markets.

But it found that shortages faced by the Santos-backed Gladstone gas project had changed that.

Victoria's gas producers, for example, are also selling gas into the export projects, shipping the gas north costs at around $3.50-$4 a gigajoule, with the high cost traditionally creating a buffer in favour of domestic gas users in the southern markets.

"But this buffer has been weakened by the Cooper Basin producers (particularly Santos) committing significant volumes of gas to the LNG projects," the report warned.

"Those producers historically played a critical role in competing with the Gippsland Basin producers for market share in the southern states.

"Weakening this competitive constraint potentially exposes gas buyers in Victoria to prices equivalent to the Queensland price plus transportation costs from Queensland. These dynamics are evident in significant disruption to the established gas flows in southern Australia."

The warning came as prices in the wholesale gas market in Victoria hit $9 a gigajoule Tuesday, well above recent levels of around $6, in the wake of cool weather which also pushed the price in NSW to top $11 a gigajoule.

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