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ACCC points to improved gas supply in 2020

18 February 2020

Joint media release with Treasurer the Hon Josh Frydenberg MP and Minister for Resources, Water and Northern Australia, the Hon Keith Pitt MP

The Australian Competition and Consumer Commission (ACCC) reported an improvement in the gas supply outlook across the East Coast market in 2020, with a supply shortfall unlikely in the short-term.

In its eighth Interim Report from its ongoing Gas Inquiry, the ACCC said LNG producers are forecast to have enough gas to meet both domestic and export commitments in 2020. Projected domestic supply for 2020 is 2025 PJ (petajoules), while demand is forecast to only be 1831 PJ. LNG producers are also expected to have 138 PJ of available gas in excess of their contractual commitments, which could be used to supply the domestic market.

However, the long-term supply outlook for southern states remains tight, highlighting the Government’s ongoing call for jurisdictions to remove blanket bans and moratoria on onshore and unconventional gas developments.

The report found that the capacity trading reforms, introduced in March 2019, have had positive results in their first eight months of operation, particularly for the Day-Ahead Auction mechanism.

The ACCC also reports that there has been a continued decline in LNG netback (export parity) price expectations for 2020. However, domestic price offers have not fallen in line with this drop.

The ACCC found that producer price offers were almost 25 per cent above expected 2020 netback prices. In the ACCC’s ongoing netback price series, the latest average expected price over the 2020 calendar year is $4.78 per gigajoule (as at 31 January 2020). 

The Morrison Government and the ACCC will continue to monitor this situation as a priority this year to ensure gas producers are fairly passing on these price reductions to commercial and industrial (C&I) gas users in their gas supply contracts.

Treasurer Josh Frydenberg released the report today and said the ACCC would continue to monitor developments in Australia’s gas markets to ensure Australia’s consumers benefit from competition.

“The Morrison Government’s plan for a strong and competitive energy market is lowering power prices, helping families with cost of living pressures and supporting small businesses so they can take advantage of new opportunities and employ more people,” the Treasurer said.

Minister for Energy and Emissions Reduction Angus Taylor said the ACCC report found an improvement in the gas supply outlook when compared to the last report in July last year.

“This is good news for households and businesses in eastern Australia as increased supply drives down prices. That’s why we signed our landmark state deal with New South Wales to get more supply into the market,” Mr Taylor said.

“The ACCC has also found that gas retailers have the ability to absorb potential cost increases by reducing their considerable margins rather than passing on costs to consumers. I strongly urge the same benefits to be passed on to manufacturing and industrial users, who may not be receiving a fair deal in long-term contract negotiations with gas suppliers.”

Minister for Resources, Water and Northern Australia Keith Pitt said the ACCC report follows the release of a comprehensive review of the Australian Domestic Gas Security Mechanism (ADGSM) in January, which found the ADGSM had helped lower domestic gas prices and secure gas supplies for Australian consumers.

“The review of the ADGSM shows the Morrison Government is determined to secure domestic gas supplies in the face of increasing demand for exports and keep prices as low as possible for Australian consumers,” Minister Pitt said.

The Ministers welcomed the ACCC decision to examine issues that have prevented some commercial and industrial gas users from accessing pipelines in regional Australia, possibly restricting competition and its associated benefits in regional areas.

The ACCC will also continue to monitor price offers and market shares to identify any potential competition concerns.

The Gas Inquiry 2017-2025 Interim Report is available on the ACCC website.

The review of the ADGSM is available on the Department of Industry, Science, Energy and Resources website.

Media contacts:

Treasurer Frydenberg's office 02 6277 7340

Minister Taylor's office 02 6277 7120

Minister Pitt's Office 02 6277 7180