ACCC chairman Rod Sims says without one major change, Australians are facing a supply shortfall and soaring costs for gas.
ACCC chairman Rod Sims says without one major change, Australians are facing a supply shortfall and soaring costs for gas.

Aussies facing gas price hikes

Victoria and NSW are facing a gas supply crisis and price hikes within three years unless additional gas developments are ramped up and a more competitive market, ACCC chairman Rod Sims has warned.

Queensland is also in danger of supply not meeting demand by 2026 as Mr Sims called for a more competitive local gas market.

He said at the core of the issue was a dysfunctional market where, despite gas prices falling significantly over the past year, costs were still higher than export parity.

ACCC Chair Rod Sims has slammed the mining industry for dragging the chain on agreeing to Gas Code of Conduct which was supposed to be agreed to by February . Picture: Zak Simmonds
ACCC Chair Rod Sims has slammed the mining industry for dragging the chain on agreeing to Gas Code of Conduct which was supposed to be agreed to by February . Picture: Zak Simmonds

The discovery was made in the ACCC's January 2021 report.

"The long term supply outlook shows us there is a risk of a shortfall for southern states as early as 2024, and the east coast market as a whole in 2026 and beyond," Mr Sims said in a statement.

"New sources of supply and related infrastructure will be required to avoid a potential shortfall.

"Adding to this problem is the limited degree of competition at the producer and retailer level, which results in higher prices and a reduction in competitive outcomes for commercial and industrial users."

Mr Sims said stronger measures were needed to reduce gas costs for businesses and households and that would evolve with a voluntary Gas Code of Conduct (GCC) which has been in progress since October.

The GCC is intended to even the playing field between gas suppliers and buyers.

"The Code provides an opportunity for industry to collectively develop a new set of rules that addresses poor selling practices and facilitates competitive outcomes," he said.

"Our gas inquiry continues to find the gas market is not a functional, competitive market.

"We can see no end to the increasingly complex and difficult environment we are in, unless LNG producers and other gas suppliers, pipeline operators and governments all work together."

The site of a domestic gas production in the Surat Basin. More suppliers are needed to drive down costs and shore-up supply for the east coast states. Pic: Senex Energy Limited
The site of a domestic gas production in the Surat Basin. More suppliers are needed to drive down costs and shore-up supply for the east coast states. Pic: Senex Energy Limited

He said there had been an industry failure to present a substantially progressed GCC by the government's deadline of February, which is "unacceptable".

"Stunningly gas users have yet to even see a copy of the Code," he said.

Australian Petroleum Production & Exploration Association (APPEA) CEO Andrew McConville said progress had been made on a GCC but the best way to drive down costs was to increase suppliers.

"According to the ACCC there have been substantial reductions in prices offered and agreed under gas supply agreements for 2021 supply," he said.

"Work on the voluntary Code only began in October and substantial progress has been made, as the ACCC itself has consistently noted, more gas and more gas suppliers is the best way to ensure competitive gas prices."

Australian Petroleum Production & Exploration Association (APPEA) CEO Andrew McConville said the best way to drive down costs was to increase suppliers. Picture: Supplied
Australian Petroleum Production & Exploration Association (APPEA) CEO Andrew McConville said the best way to drive down costs was to increase suppliers. Picture: Supplied

The industry, though, needs to be mindful regulations do "not negatively impact investment", he said.

Australian Energy Market Operator (AEMO) warned of a shortfall in eastern and southeastern Australian supply unless developments and production were ramped up in the near future.

AEMO released its annual Gas Statement for Opportunities in March which makes forecasts on demand and supply based on information from gas producers about reserves.

"Supply from existing and committed gas developments will be sufficient to meet forecast gas demand across eastern and southeastern Australia until at least 2023, provided that liquefied natural gas (LNG) export spot cargoes are redirected to meet domestic demand, if required," the report stated.

The Dan Andrews Victorian government will lift its moratorium on gas exploration from July 1 but the state still faces potential “supply gap” days in 2023. Picture: NCA NewsWire / Andrew Henshaw
The Dan Andrews Victorian government will lift its moratorium on gas exploration from July 1 but the state still faces potential “supply gap” days in 2023. Picture: NCA NewsWire / Andrew Henshaw

Victoria, where a 2017 moratorium on gas exploration was recently lifted to restart in July, could still have supply gaps in 2023, the AEMO warned.

"Several gas fields are forecast to cease production sometime between mid-2023 and mid-2024. If production ceases earlier, this could create peak winter day supply gaps in Victoria in 2023," the report stated

"Anticipated gas field projects (considered likely to proceed within the outlook period) are forecast to improve resource adequacy until at least 2026 if developed.

"However, due to the location of most of the anticipated projects within Victoria, dynamic operational pipeline constraints would limit their effectiveness in addressing the forecast peak winter day supply gaps under certain conditions."

Originally published as Aussies facing gas price hikes


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