Oz East Coast Market 'Opaque': ACCC
Australia’s east coast gas market has improved but is still suffering from a lack of transparency and the Australian Competition and Consumer Commission has decided to go ahead with regularly publishing LNG netback prices on its website, the watchdog said April 27.
“At the moment gas users haven’t got enough information to assess how international prices are driving domestic gas prices,” the Australian Competition and Consumer Commission’s chairman Rod Sims said.
“We believe that publishing LNG netback prices is an important step towards improving gas price transparency to improve the competitive bargaining process,” he said.
The ACCC was directed by the Australian Government in April last year to conduct the inquiry into the supply of and demand for wholesale gas in Australia following concerns of high prices and of a potential shortage.
Its first interim report in September last year found that a substantial shortage this year was likely and the government and the east coast’s LNG exporters later agreed to offer sufficient gas on reasonable terms to meet any domestic shortfall. The watchdog said April 27 that while things have improved since then, the market is still not functioning effectively.
Prices offered to large commercial and industrial gas users towards the end of 2017 were well below the peak of over A$20/GJ ($14.3/mn Btu) in early 2017. After falling to a range of A$8-12/GJ between June and November 2017, offers made between November and January 2018 narrowed to A$8-10/GJ, the ACCC noted.
Despite the improved prices, the watchdog says the LNG netback prices are needed to give gas users better information about export parity prices. An LNG netback price is an effective price to the producer or seller at a specific location, calculated by taking the delivered price paid for gas and subtracting or “netting back” costs incurred between the location and the delivery point of the gas.
The prices will be derived using futures prices of the S&P Global Platts Japan Korea Marker and forward estimates of shipping, liquefaction and transportation costs. They will extend back to the beginning of 2016 and it will also publish a forward LNG netback price indicator extending to the end of the following calendar year, the ACCC said.
It will begin publishing the prices in the coming months, it said.
The ACCC’s next interim report is scheduled to be provided to the finance ministry in late July. It will report on the gas supply and demand outlook and the recent experiences commercial and industrial users in securing gas supply, the watchdog said.