Curtis Island LNG exports create 'winners and losers'

MILLIONS of tonnes of LNG passes through Gladstone's port, but businesses just miles away in Gladstone and across Australia can't get enough of it, the ACCC's Inquiry into the east coast gas market has found.

The construction of Curtis Island's three LNG plants is increasingly drawing gas supplies out of the domestic market, as the companies operating the plants seek to feed lucrative contracts overseas.

"There has been unprecedented change … with the development of Liquefied Natural Gas facilities in Queensland," ACCC boss Rod Sims says. "These changes have created winners and losers."

LNG shipment.
LNG shipment.

The ACCC says while the LNG plants significantly boost Queensland's economy, the plants are disrupting "traditional flows" by opting to export to foreign markets, particularly in Asia.

It means Gladstone is developing into an LNG service centre with the promise of jobs at the expense of businesses desperate for gas across Queensland.

>> LISTEN: Gladstone to develop into 'LNG service centre' in Curtis Island new phase

 

"A much larger market" and "a higher value on gas than domestic users" is the attraction of foreign markets, according to the ACCC.

The companies operating the Curtis Island plants have even begun exporting their reserve gas supplies, which previously fed the domestic market. 

It comes as the Inquiry found one of the "three major factors" affecting local supply is that the companies -- particularly GLNG -- increasingly buy gas off third party companies to make use of the plants' capacity, and then ship it overseas. 

 

"The LNG projects that previously supplied the Queensland domestic market have stopped … [to ensure] a smooth build-up to LNG production," the report says.

Mr Sims said many Australian businesses relying on gas are just starting to feel the pinch, as they couldn't secure new gas agreements for this year, or the offers were well overpriced.

"Some suppliers have taken advantage of this supply uncertainty and potential shortfalls to increase prices and implement more restrictive non-price terms and conditions," Mr Sims said.

The Curtis Island companies, however, were part of a chorus of gas suppliers insisting there wasn't a problem with meeting local demand.

The report says "these conflicting claims about the availability of offers for gas supply and the competitiveness of the east coast gas market" brought on the Inquiry.

Dr Malcolm Roberts, the head of the peak industry body representing gas and oil companies, APPEA, said "contrary to claims by some parties … there is no evidence of misuse of market power or other breaches of competition law" which prevented businesses from securing gas supply agreements.

"While market conditions were tight in 2012-2014, a range of gas supply agreements were made during this period. As the report finds, even more gas supply offers are now available.

Dr Roberts also welcomed the ACCC's move to shy away from recommending companies be forced to keep reserves for the domestic market or limit exports, saying it would only be a short-term fix that would discourage investment in exploration.

However, the ACCC also suggested a process where companies' publicly disclose their reserve gas levels would stop confusion that is currently "hindering efficient market responses" and "not signalling expected supply problems".

While Dr Roberts said "APPEA understands the desire for greater transparency [it] will consider these recommendations on their merits".

A spokesman for Santos said it was too early for the company to respond to the report. 



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