The Federal Government has announced a new agreement under its JobMaker plan, to maintain downward pressure on energy prices.
The new Heads of Agreement with east coast liquefied natural gas (LNG) companies will ensure more gas is offered to the domestic market, more often, and on more competitive terms.
The agreement, signed by Prime Minister Scott Morrison and LNG exporters Australia Pacific LNG, Queensland Curtis LNG and Gladstone LNG, is expected to secure competitively priced gas supply for the east coast market at least until 2023.
Prime Minister Scott Morrison said cheaper and more reliable energy was central to Australia’s economic recovery and the Government’s JobMaker plan.
“Gas is critical to our economic recovery and this agreement ensures Australian businesses and families have the gas supply they need at the cheapest possible price,” the Prime Minister said.
“This is about making Australia’s gas work for all Australians, while also supporting economic growth and backing important regional jobs in our expanding LNG sector.
“As part of our JobMaker plan we are delivering more Australian gas where it is needed at an internationally competitive price, this particularly includes manufacturing businesses who employ more than 850,000 Australians, many of which rely on gas to operate.”
Since the Federal Government first acted in mid-2017 to ensure gas supplies for the domestic market through the introduction of the Australian Domestic Gas Security Mechanism and the first Heads of Agreement, the spot price for gas has dropped from $12.50 to $10.50 a gigajoule to now be between $7 to $5 a gigajoule.
Minister for Resources, Water and Northern Australia, Keith Pitt, said the new Heads of Agreement puts Australian families and businesses first by making sure Australia does not experience a shortfall in supply at the expense of exports.
“The Coalition Government remains committed to delivering lower energy prices, and to make sure all Australians benefit from increased supply and reliability,” Mr Pitt said.
“The strengthened Heads of Agreement commits LNG exporters to offer uncontracted gas to the domestic market first on competitive market terms before it is exported.
“It compliments the Australian Domestic Gas Security Mechanism which also references the Australian Competition and Consumer Commission (ACCC) LNG netback price series.
“Both the AEMO and ACCC have found the east coast of Australia has a low, but increasing, risk of facing a gas shortfall.
“We are working to get the right balance between affordable gas for manufacturers and a price that encourages new gas resource development.
“I want to also acknowledge the success of our LNG export industry, especially here in regional Queensland.
“It has brought jobs and opportunity to many regional communities in central and southern Queensland and put money in the pockets of farmers who are hosting the gas wells on their farms.”
Member for Flynn, Ken O’Dowd, said the agreement highlights the key role gas plays in Australia’s local industries.
“The gas industry drives significant local exports and is also a big employer in the Gladstone region and the agreement will lay the foundation for future growth aiding the COVID recovery,” Mr O’Dowd said.
The Federal Government said the Beetaloo Basin Plan has also been finalised and work is progressing on unlocking gas in the North Bowen and Galilee Basin.
Mr Pitt previously announced a commitment to provide up to $50 million for exploration that occurs before 30 June 2022 in the Basin, along with $173 million for road upgrades to support the development of a gas industry based on Beetaloo gas resources.
“The Beetaloo has the potential to mirror the US shale gas revolution – bringing jobs and investment to the North while providing secure and affordable gas supplies to industry,” Mr Pitt said.
“The Australian Government will continue to work with relevant regulators and energy market bodies, including AEMO, ACCC, Australian Energy Market Commission and the Australian Energy Regulator, to build on reforms which improve the functioning of the east coast domestic gas market.
“This includes establishing an effective Gas Hub at our most strategically located and connected gas trading hub at Wallumbilla in Queensland to deliver an open, transparent and liquid gas trading market.”
Affordable gas is also a critical component of the Government’s Modern Manufacturing Strategy, which seeks to grow Australia’s manufacturing sector by building scale in areas of competitive strength, driving collaboration and better aligning resources across governments, boosting industry and the research community, and strengthening sovereign resilience in areas of strategic importance.
APPEA Chief Executive, Andrew McConville, said, “Individual prices offered to domestic gas users will continue to be internationally competitive and have regard to the producer’s cost of supply and factors that may be relevant to users’ individual circumstances, including the terms and conditions of their gas supply agreement and any applicable transportation or retailer charges.”
Mr McConville said the industry appreciated the common-sense approach of the Federal Government in working with industry to finalise the Heads of Agreement through to 1 January 2023.
“The approach taken to recognise the realities of the gas market on the east coast will deliver competitive gas supply outcomes for customers and continue to encourage more investment in new supply by producers,” Mr McConville said.
“This is the best way to ensure the lowest possible prices for customers. This is evidenced by the fact that the Queensland LNG industry – an investment of around $70 billion made possible only by the scale of international contracts – also delivered more supply and competition in the domestic market.
“The east domestic market, including the southern states, has benefited from these developments with the gas flowing from these developments providing us with the benefit of export income as well as domestic gas supply.
“The Heads of Agreement reflects our sector’s ongoing commitment to the domestic market but importantly recognises the investment scale afforded by international contracts.
“The answer to ensuring competitive gas prices in Australia on an ongoing basis is more supply and more suppliers – and developing gas resources closest to local markets.
“The industry is committed to working with the Commonwealth and State governments to achieve this.”