Australia’s natural-gas cartel is bleeding Australia | RenewEconomy

Australia’s natural-gas cartel is bleeding Australia

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It’s hard to overstate the bizarre nature of the gas market in Australia.

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ieefa gas updateDebate rages after an IEEFA spot-price analysis showing Australians consumers paying more for Australian natural gas than their Japanese counterparts who import it as a liquefied product.

It’s hard to overstate the bizarre nature of the gas market in Australia.

Only recently, gas was cheaper in Australia than in the U.S. But the development of three new LNG terminals on the Australian east coast has driven up prices by linking domestic supplies to the most expensive gas market in the world, the north Asian market.

Perhaps the larger problem for Australian consumers is that the East Coast gas market is controlled by an opaque cabal of players that include Shell, Origin Energy, Santos and BHP/Exxon and that collectively control existing supply and that fail to disclose existing production capacity, reserves or resources on a consistent basis.

Basic information is almost impossible to come by. For contract prices, for instance, the most recent data available is from a survey conducted eight months ago for the Australian Competition and Consumer Commission (ACCC). 

There are no official figures for contract prices in Australia today, a circumstance that would be unheard of in markets like the U.S.

Regulators are floundering and the situation has become so preposterous that proposals for South Australia to develop a regasification plant to import LNG from the U.S. are being seriously considered.

The revelations that Australians are paying more for Australian gas than their Japanese counterparts drew a predictable response from the gas industry: attack the messenger.

Industry analysts, led by consultants EnergyQuest, run by a long-time former Santos executive,  Graeme Bethune, publicly questioned our findings, but not very effectively because it’s hard to argue with fact.

For the month of July, the Japanese Ministry of Economy, Trade and Industry (METI) had the spot market price (which in turn drives contract prices) at $8.42/GJ. In Australia for the same month, the Adelaide spot price—one of three short-term trading markets set up by the Australian Energy Market Operator (AEMO) with the express purpose of providing transparency—was $13.90/GJ.

While the industry has criticized our use of spot-market pricing for our analysis—and it’s true that the Australian spot market is not functioning as it should—a dearth of transparency only illustrates a broader point: gas prices are sky high and information on supply is not made public.

The government is well aware of the issue but is being pressured toward false solutions that include opening high-cost new coal seam gas wells, a move that would do nothing to lower prices.

The core problem is the very existence of a cartel that allows gas companies to extract extraordinary prices domestically and in the face of a global glut and globally depressed prices.

Time is money, and regulators need to move now. Australian manufacturers in particular can’t afford to wait around for change.

Bruce Robertson is an IEEFA energy analyst.

 

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8 Comments
  1. Tim Forcey 4 years ago

    On stage at the Australian Domestic Gas Outlook conference in Sydney in March, Graeme Bethune decried the paucity of information available concerning gas reserves, in particular those in the Bass Strait. The comment was made “this is no way to run a country”…

  2. Bungarra 4 years ago

    When doing some R&W using LPG gas burners for weed control I was struck by the relative costs of gas to Australia out of our wells, compared with how little Japan et al were paying. That was > 17 years ago.

    The whole issue is just how unwilling our political masters are to put the needs and benefits of Australians first compared to those who have gained influence over them. (Is contributing to the Party coffers bribery ??).

    Similar issue with the issue of civil defense re fuel reserves – how much fuel do we have if supplies are interfered with by factors outside of our control – 4 – 6 weeks?

    That is to say nothing of the complaints that local manufacture is not competitive with O/S sources. So we export cheap gas, charge allot here, net result less jobs here. ???!!!

    • Frank 4 years ago

      Well in fairness, there are a few dozen gentlemen getting absurdly wealthy off the setup. So there’s that.

  3. Finn Peacock 4 years ago

    But I’ve just seen this ad which says there has never been a better time to get gas. And that gas prices are falling. Surely the gas cartel would not lie…

  4. Les 4 years ago

    This is the land of the oligopoly. No one really challenges them

  5. Leroy Essek 4 years ago

    Water as 100% zero pollution fuel via Joi Scientific located at NASA’s KSC.

  6. Radbug 4 years ago

    This is Dumping!!!! Surely this practice runs foul of all the free trade agreements that Tony Abbott was so effusively taking pride in (and the Turnbull Government is taking pride in) just a year or so ago!!

  7. Chris Fraser 4 years ago

    Not sure if I understood that in Japan, the spot market lasts the whole month of July ? If we sell for $13.90/GJ, does the Japanese government subsidise the cost to reduce it to $8.42/GJ spot ?

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