Page 4 - GLNG Week 07 2021

GLNG COMMENTARY GLNG

ACCC warns of gas supply

shortfalls, price spikes

The Australian competition watchdog has warned that a retreat

in domestic gas prices may be short-lived, owing to a looming

supply shortfall

PERFORMANCE AUSTRALIA’S competition watchdog has providing some relief to manufacturers and
released an interim update to its ongoing inquiry other gas users on Australia’s East Coast, prices
WHAT: into the state of the country’s gas market, revis- were still higher than export parity.”
The ACCC has said iting in the process perennial hot topics such The commissioned said price offers for sup-
warned of a 30 PJ gas as pricing, supply shortfalls and the need for ply in 2021 fell from AUD8-14 ($6.22-10.89) per
supply shortfall in 2024. imports. GJ during the second half of 2019 to AUD6-8
The Australian Competition and Consumer ($4.67-6.22) per GJ by mid-2020.
WHY: Commission (ACCC) said in its Gas Inquiry “The fall in gas prices is very welcome news
Not enough domestic 2017-2025 interim report, which was published for major gas users who, like many other
production projects have on February 16, that while wholesale gas prices Australian businesses, have faced enormous
been sanctioned. had fallen, domestic buyers were still paying challenges in responding to the COVID-19 pan-
more for locally produced gas than buyers demic,” ACCC chairman Rod Sims said.
WHAT NEXT: overseas. But while the gap between domestic prices
Prices will likely rise, It highlighted that the existing correction in and LNG netback levels had closed, the watch-
justifying the construction Australian gas prices, driven in part by record dog noted that domestic customers were still
of at least one LNG import low oil and spot LNG, may not last given that paying more than export parity.
terminal. the East Coast gas market is just a handful of “We welcome the narrowing of the once-
years away from witnessing an annual supply large gap between domestic and export parity
shortfall of as much as 30 PJ (781.46mn cubic prices, but despite some improvement domestic
metres). customers are still paying more than overseas
The commission noted that government customers,” Sims said. “LNG producers have not
efforts to ringfence LNG export projects’ provided an adequate explanation as to why this
uncontracted gas volumes were unlikely to is the case, or why we should accept it.”
bridge the divide and would require one of the The report notes that expected 2021 LNG
proposed import terminal projects currently to netback prices fell from about AUD8 per GJ in
be sanctioned. November 2019 to less than AUD5.50 ($4.28)
per GJ in May 2020, remaining below AUD6 per
Pricing picture GJ between March and August 2020.
The ACCC observed that coronavirus (COVID- A troubling prospect for the country’s gas
19) pandemic had put significant downward consumers, however, is the fact that a supply
pressure on gas prices over the past year. How- shortfall projected to arrive in the middle of the
ever, it noted: “While lower gas prices are decade is likely to drive prices higher.

P4 www. NEWSBASE .com Week 07 19•February•2021