Australians pay close to the highest electricity prices in the world, and we’re about to start paying some of the world’s highest gas prices, too. That’s because we’re about to start exporting gas for the first time from the east coast, and there’s no limit to the amount of gas that can be sent overseas.
Australia is about to become the first country in the world to export coal seam gas—without the CSG boom in Queensland, exports on the east coast simply wouldn’t be viable. Equally, coal seam gas mining wouldn’t be feasible in Australia at the old price of $3-4 per gigajoule, because it costs a lot more to extract than conventional gas.
Customers in Asia are prepared to pay up to $18 per gigajoule for our gas. Since there’s no policy to disconnect Australia from these prices, our gas prices are now rising to meet what’s called the ‘netback’ price—the Asian price, minus the cost of processing and shipping.
A new report commissioned by industry groups and prepared by Deloitte Access Economics says skyrocketing gas prices will damage the Australian manufacturing sector to the tune of $118 billion over the next seven years, and lead to a loss of more than 14,000 jobs.
Household users of gas might have noticed their gas bills rising over the last few years. Household bills have risen around 50 per cent, largely due to the almost $7 billion gas networks have spent on the pipelines that bring gas to our homes.
It’s a similar story to what happened with the poles and wires, only on a smaller scale.
But just like electricity, the networks were granted rates well above what was necessary. When the regulator tried to curtail that rate of return, the networks took them to the appeals tribunal; it was in this way that Jemena, which serves the Sydney market, was granted a rate of return of 10.33 per cent.
Australians are already struggling to pay their energy bills. According to the social services agency ACOSS, a growing number of Australians are in what’s called ‘energy poverty’, which means they’re having to choose between using electricity and things like food and other essentials.
So is the solution more coal seam gas fields, or should gas exporters be required to sell cheaper gas at home?
Jess Hill concludes her two-part investigation into the high price consumers are paying for energy in Australia.
APPEA, peak body for the oil and gas industry (http://www.appea.com.au/)
Santos information on the Narrabri Project (http://www.santos.com/our-activities/eastern-australia/new-south-wales/narrabri-gas-project.aspx)
ACOSS report: preventing shocks and addressing energy poverty (http://acoss.org.au/images/uploads/Concessions_paper_2014_FINAL.pdf)
AI Group report: Energy shock: the gas crunch is here (http://www.aigroup.com.au/portal/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet/LIVE_CONTENT/Publications/Reports/2013/13219_energy_shock_gas_crunch_is_here_web.pdf)
Domgas report: Australia’s Domestic Gas Security (http://www.domgas.com.au/pdf/Alliance_reports/DomGas%20Report%202012.pdf)
Stuart Khan’s submission to the NSW Coal Seam Gas Inquiry (http://www.parliament.nsw.gov.au/prod/parlment/committee.nsf/0/3C3983D507EBBE13CA25790D00257814)
Report on produced water from coal seam gas, prepared for the NSW Chief Scientist by Stuart Khan and Geena Kordek (http://www.chiefscientist.nsw.gov.au/__data/assets/pdf_file/0017/44081/OCSE-Final-Report-Stuart-Khan-Final-28-May-2014.pdf)
Initial report on coal seam gas by the NSW Chief Scientist (July 2013) (http://www.chiefscientist.nsw.gov.au/coal-seam-gas-review/initial-report-july-2013)
Report on Energy Poverty, by Lynne Chester and Alan Morris (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2385406)
Report: The economic impacts of a domestic gas reservation, prepared for APPEA by Deloitte Access Economics (http://www.deloitte.com/view/en_AU/au/industries/energy-resources/oil-gas/2d946d930ac71410VgnVCM3000003456f70aRCRD.htm)