Australian gas prices remain below Asian average

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Average wholesale gas prices in Australia remain lower compared to the average in the Asia‑Pacific region, according to a new report.

The International Gas Union’s Wholesale Gas Price Survey 2017 shows that the average wholesale gas price in Australia last year of around $US4.29/MMBTU[1] was around one-third less than the average price for the Asia‑Pacific region.

By comparison, Australia’s leading trade partners Japan, South Korea and China all paid average wholesale gas prices between $US7 and well over $US8/MMBTU. Australia also enjoyed lower wholesale gas prices than its two regional LNG export competitors, Malaysia and Indonesia.

Globally, Australia’s average wholesale price ranked 26th in a survey of 52 nations.

APPEA Director Matthew Doman said the survey showed the highest wholesale prices in 2016 were found in largely LNG-dependent countries where the industry exported LNG and earned export revenue for Australia.

“While the Australian gas market is tight and prices for new contracts are higher than they have been historically, it remains the case that, contrary to some claims, across the economy Australian gas consumers are not paying prices above those paid on average in Japan or other LNG importing nations,” Mr Doman said.

“Quite the opposite is true. Australia’s wholesale gas prices remain in the ‘middle of the pack’, a position they have held for many years.

“Removing unnecessary government restrictions on exploration and development is the most effective way to boost supply, enhance competition and put downward pressure on prices, ensuring Australia retains or improves its global position, while enjoying the benefits that flow to the nation from our LNG exports.”

APPEA has also warned, however, that LNG benefits cannot be taken for granted

The June 2017 Resources and Energy Quarterly released by the Department of Innovation, Industry and Science confirms liquefied natural gas (LNG) is on track to overtake metallurgical coal as Australia’s second largest export commodity in 2018-19.

The report forecasts the value of Australia’s LNG exports will jump from $23 billion to $37 billion in the next two years as new projects in Western Australia and the Northern Territory enter production.

APPEA Director Matthew Doman said LNG exports delivered jobs and revenue for Australia as well as energy and reduced emissions for our Asian trading partners.

“The Resources and Energy Quarterly rightly recognises the growing value to Australia of our successful LNG industry but it also points to emerging threats on the horizon,” Mr Doman said.

“While global supply capacity is set to increase from 285 million tonnes to 382 million tonnes by 2019, almost half of this increase will come from the five new export projects under construction in the US.

“Qatar, the world’s largest LNG producer, has also signalled its intention to massively increase its own export capacity.

“So, Australia may soon find itself caught between an established LNG giant determined to regain its market share and an emerging challenger, hungry for success.

“A supportive policy and regulatory framework in Australia is vital to the industry meeting these competitive challenges.”

Mr Doman said the risk to Australia’s export industry was exacerbated by threats to export contracts under the Commonwealth’s new Australian Domestic Gas Supply Mechanism and possible tax increases on new gas projects.

“As a nation, we cannot take the industry’s ongoing success for granted. We are facing intense competition from low-cost producers in an already oversupplied global LNG market,” he said.

“Australia can succeed as a high-cost, low-risk country but we cannot succeed as a high-cost, high-risk country.

“Policies that undermine our competitiveness or tarnish our investment reputation risk doing significant damage to our LNG industry and, ultimately, our economy.”

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