Current developments in the Australian natural gas market

01 Dec 2009Archived News Climate Change Matters

Australia has abundant reserves of natural gas, the lowest carbon emitter of the fossil fuels. It has proved a reliable, cost effective energy choice for many Australian businesses. This article considers recent developments in the supply of natural gas and the emergence of a gas trading market.

 

Gas trading market

Australia is moving towards a more active and transparent gas trading market. The Short Term Trading Market (STTM) is a wholesale market system to be introduced from June 2010, designed to facilitate short term gas trading using market driven short term (daily) prices. The STTM will operate initially in the New South Wales and South Australia hubs and interact with the gas market in Victoria.

For gas customers the gas trading market should bring some transparency on the cost of gas that goes into your delivered gas price. It should provide more information, more price competition and potentially opportunities for those who can adjust their gas usage on peak days. If gas is a large part of your energy budget this is a development which warrants monitoring.

Gas supply concerns

Australia has a booming gas production industry in Qld and northern NSW, so why is the government concerned about future shortages of gas for Australian customers? In WA over recent years the introduction of Liquefied Natural Gas (LNG) facilities has resulted in a situation where gas sellers prefer to sell gas to overseas buyers at high LNG prices, rather than to local customers at lower domestic prices. The situation is so concerning that the WA government has a quota system in place where a portion of all gas must be reserved for the local market.

With the looming introduction of LNG in Qld there is a growing concern about a similar situation arising on Australia’s east coast. In response to these concerns the Queensland government recently created a discussion paper in which the government floats the option of preserving between 10 and 20 per cent of output, arguing this will keep prices low for the Queensland domestic market. The matter is quite sensitive because gas companies can potentially obtain up to three to four times as much for their natural gas overseas as they can in Australia.

For large gas users in NSW and Qld this is a potential issue that may need to be monitored and managed.

A future NSW gas industry

Five to ten years ago Coal Seam Methane (CSM) in Qld was an esoteric idea pursued only by a few small companies. Today it is mainstream solution to current and future gas needs. NSW also has large reserves of CSM and whilst the NSW industry is well behind QLD, the Northern NSW area around Gunnedah and Narrabri has the potential to be the next ‘Hunter Valley”. Companies such as Santos, Eastern Star, AGL and others are actively developing gas fields in the area.

For NSW gas customers this creates some potential opportunities: Large energy users may find the future development of a low cost energy hub in the upper Hunter Valley / Northern NSW areas with direct access to low cost gas, coal and electricity. This also creates the potential opportunity for large gas users to work together with these new gas producers, to help them develop new fields in return for low cost gas supply.

Gas Bulletin Board

Customers interested in the flow of gas around the Australian market may like to take a look at the new gas bulletin board. It provides a real time map of gas flows and gas usage around the east coast. For gas customers this is a great way to understand where your gas comes from, which pipelines you are paying for, and the constraints. For large gas users the real time map is a great tool to understand the location of the lowest cost gas in Australia.

The gas bulletin board can be found at http://www.gasbb.com.au under “actual gas flow data”. 

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