With the first LNG exports from Curtis Island off Gladstone expected later this year, it is timely to consider what the linkage of our domestic gas market to the international market will mean for gas prices in Australia. A Grattan Institute study, Getting Gas Right, has found increases of more than 80% in wholesale gas prices may result. This will have significant impacts on industrial users of gas. For example, the anticipation of this gas price increase has led Stanwell to re-commission a coal-fired generator at Tarong, as the economics of coal-fired power production have improved relative to gas-fired power production (see Electricity providers return to coal-fired power as natural gas export revenue soars). Also, households will face significant increases in gas prices, although the proportionate price rise will be less than the wholesale price rise because the gas itself contributes only a fraction of the cost of supplying gas to households. The Grattan Institute study found that Queensland household gas bills may rise up to $60 per year.
Given these significant developments arising from imminent LNG exports, it seems appropriate that the Queensland Branch of the Economic Society of Australia, of which I’m Deputy Secretary, would schedule a presentation next month from a leading energy economist, Dr Liam Wagner, on the East Coast gas market:
Australia is in a key geographic and strategic position to supply a sizable proportion of the region’s LNG demand, and potentially be the world’s largest supplier. The impending entry of the Eastern States of Australia as exporters of LNG will also bring previously quite cheap domestic gas up to parity with international prices. Current trends in the development of the natural gas industry, particularly in Western Australia, have shown that the internationalisation of prices can have a significant impact on electricity prices and the availability of gas for industrial users. This seminar will outline the model ATESHGAH, purpose built for Australia’s natural gas markets to examine the effects that agent-based behaviour may have on Australia’s Energy Markets.
I hope you will be able to attend this lunchtime event, to be held at Morgans at the Riverside Centre, Brisbane on Wednesday 15 October 2014. Having worked with Liam in the past, I’m sure it will be very informative and insightful.
Information on the event including how to register is available on the ESA Qld website.