ACCC flags gas supply shortage; Jim Chalmers puts companies on notice

East coast gas prices are soaring on the back of a global energy crunch, which has been intensified by Western nations shunning Russian supplies of oil and gas to starve Moscow of the revenue it needs to fund the war in Ukraine.

Australia’s LNG exporters are earning record sales revenue while many local manufacturers are struggling under high domestic gas prices.

ACCC chair Gina Cass-Gottlieb said the consumer watchdog was “strongly encouraging” LNG producers to increase domestic supply or face market intervention.

“Our latest gas report finds that the outlook for the east coast gas market has significantly worsened. To protect energy security on the east coast, we are recommending the resources minister initiate the first step of the Australian Domestic Gas Security Mechanism,” she said.

The ADGSM empowers King to redirect exports into the local market. However, when gas prices took off following Russia’s invasion of Ukraine, Energy Minister Chris Bowen said the ADGSM was “not a short-term answer” because it required about six months of consultation and only triggered enough supply to fill gaps rather than cut the cost. gas.

“It is a supply trigger, not a price trigger,” he said.

East coast gas producers export the majority of their supply to the lucrative international market, prompting warnings from the ACCC that domestic customers cannot be overlooked in favor of large, international buyers seeking long-term contracts.

The ACCC’s projected shortfall of 56 petajoules for 2023 is the largest it’s made since beginning its inquiry in 2017.

“LNG exporters are expected to contribute to the shortfall in 2023 by withdrawing 58 petajoules more gas from the domestic market than they expect to supply,” the report said.

“This could place further upward pressure on prices and result in some manufacturers closing their businesses, and some market exit has already occurred.”

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Australia’s east-coast gas producers on Monday disputed the suggestion that a shortfall was looming, pointing to the ACCC’s finding that 167 petajoules of gas remained uncontracted and would be offered to local buyers first.

“This is more than enough gas to ensure that no shortfall occurs,” said Damian Dwyer of the Australian Petroleum Production and Exploration Association, which represents oil and gas companies. “Gas customers can be assured supply will be adequate next year so households and businesses can continue uninterrupted.”

However, major gas users declared the ACCC’s latest report had yet again painted an “alarming picture” for businesses that depended on the fossil fuel.

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The Energy Users’ Association of Australia, whose members include ASX-listed fertilizer giant Incitec Pivot and building material supplier Brickworks, backed the government’s decision to initiate the first steps of the ADGSM, but feared it would “not be enough”.

“Energy users are looking for stronger action such as the ADGSM and heads of agreement triggers that not only ensure the volume of gas is sufficient but also seek to ensure the price of gas is affordable,” chief executive Andrew Richards said.

“It is time for governments and regulators to stop rattling the saber and to draw their sword. It seems clear that threatening the gas industry with stronger actions is not enough. It is only taking strong actions that will effect change.”

The ACCC’s report did not identify any wrongdoing but Chalmers said he encouraged the consumer watchdog to act if any anti-competitive behavior were uncovered in the future.

“It’s critical that our domestic gas supply is secure and competitively priced, particularly when households and businesses are under extreme pressure,” he said.

“The ACCC has raised concerns about the level of competition in this market, and I welcome its commitment to look into this and take enforcement action as required.”