ACCC: Prices improve, gas market still suffers

Despite improved prices, the east coast gas market continues to suffer from a lack of transparency across the supply chain, according to the Australian Competition and Consumer Commission (ACCC).

The ACCC’s Gas Inquiry 2017-20 Interim Report – April 2018 has revealed conditions have improved since September last year, but the market is still not functioning effectively.

The ACCC’s first report, released in September, projected a “substantial gas shortfall” of 55PJ in 2018.

The report prompted a concerned Prime Minister Malcolm Turnbull to meet with the heads of major east coast gas providers, who guaranteed to offer more gas to the domestic market to meet the shortfall.

According to the new report, after falling to a range of $8-12/GJ between June and November 2017, price offers made between November and January 2018 narrowed to $8-10/GJ for gas commodity.

To promote improved gas price transparency, the ACCC said it would begin publishing LNG netback prices on its website to provide gas users with better information about export parity prices.

The east coast gas market is exposed to international LNG prices, which influence domestic prices, ACCC chairman Rod Sims said.

“At the moment gas users haven’t got enough information to assess how international prices are driving domestic gas prices,” Mr Sims said.

“We believe publishing LNG netback prices is an important step towards improving gas price transparency to improve the competitive bargaining process.”

Mr Sims said other measures aimed at increasing transparency were also beginning to come into effect.

“While it is early days, we have found published standing prices for pipeline services are higher for many pipelines than the prices paid under existing contracts,” Mr Sims said.

“They are also higher than what we have seen in recent contracts. We do not think this was intended when these measures were put in place.

“The ACCC will continue to review the information published under the new disclosure obligations.

“In the meantime, we believe shippers should be able to negotiate prices below the standing prices recently published.”

APPPEA chief executive Dr Malcolm Roberts said the industry supported measures to improve transparency in the market.

“A netback price series should provide customers with useful information about trends in the international spot market,” said Dr Roberts.

“However, as the ACCC recognises, regional spot prices are just one factor influencing local prices.

“As in other markets, point-in-time spot prices fluctuate on a daily basis and are less relevant for customers seeking long-term contracts.

“The ongoing ACCC Inquiry process continues to underline a simple truth – the only sustainable way to place downward pressure on gas prices and to improve energy security is more gas supply and more gas suppliers.

“This should be the focus of all governments.”

“We will continue in our work to improve transparency across the gas supply chain.”

The ACCC’s next interim report is scheduled to be provided to the Treasurer in July.