The Gladstone Observer

Gas prices set to triple in coming years

WHOLESALE gas prices could be set to triple as Queensland LNG exports ramp up in coming years, research by The Australia Institute showed on Friday.

The research said that as gas exports increase, the domestic cost of gas would rise to keep pace with the higher international costs.

It could see the wholesale gas price climb from about $3 to $4 a gigajoule to about $9 per gigajoule past 2015.

"Santos has reported that it is negotiating gas contracts at the higher end of the $6 to $9 per gigajoule range," the report reads.

"There contracts go beyond 2014 and 2015, when the new Gladstone gas plants will commence operations.

"This is very close to the world netback price and gives us a strong indication about what gas producers are assuming the price will be in the next couple of years."

Institute senior economist Matt Grudnoff said rather than a lack of supply being behind such price rises, it was "the introduction of coal seam gas as a new form of supply".

"Once gas from eastern Australia is being sold overseas, consumers will be at the mercy of world prices and domestic production will have little impact," he said.

The institute report also comes as the Australian Pipeline Industry Association called for greater certainty for the gas industry, including opening up more gas reserves.

Association chief executive Cheryl Cartwright said supply challenges expected in coming years were no reason to ignore the benefits of natural gas.

"Much has been written about the domestic supply squeeze when the plethora of Australian sourced CSG-LNG contracts comes on line in the next two years, but adjusting domestic market structures will not address any supply shortfall," she said.

"The only answer is to access broader supply from as many sources as possible, as soon as possible."

Ms Cartwright said it was important to ensure "technology-neutral energy investment policy" was needed, to put the gas industry on an equal playing field with the renewable sector.

"Such policies would provide appropriate signals to investors in the supply and generation sectors that there is a future for natural gas in Australia," she said.

"With such long lead times required for this investment, announcements now would help to secure our environmental and energy security future."



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