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Time to focus on hard issues in gas supply: APGA

21 April 2017 , , , ,

The Australian Pipelines and Gas Association (APGA) today called for an end to the mud-slinging and myth-peddling that is distracting policy-makers from finding a resolution to the very real problem confronting the nation of a likely shortage of affordable gas in the future.

An article in today’s Australian Financial Review adds to the confusion surrounding this important debate by repeating discredited information about the cost of gas transmission, APGA National Policy Manager Steve Davies said.

“The Australian Competition and Consumer Commission’s East Coast Gas Inquiry shows the range of prices paid for transportation on major East Coast pipelines,” said Mr Davies.

APGA National Policy Manager Steve Davies

“The article gives yet another airing to complaints from Central Petroleum that the price of transporting gas from its

Northern Territory lease to the East Coast is too high.

“It misquotes Central’s submission to the Vertigan review suggesting the company would be charged $2.70 a gigajoule to use the Carpentaria pipeline, one of four pipelines needed to carry its gas to Sydney.

“The fact is that Central’s submission quoted a price of $2.70 a gigajoule to transport its gas from Mt Isa to Sydney (across three pipelines) and $2.10 from its lease to Mt Isa.

“In another example, the reader could believe that transportation is likely to cost about twice as much as the gas in Engie’s recent contract for gas for its Pelican Point generator.

“This is complete rubbish – even if gas were to come from the Surat Basin to Adelaide, transportation would not cost
more than $3 a gigajoule (GJ) which is not unreasonable given the distance is roughly 2500 km.

“The continuing publication of incorrect information is unhelpful and casts the policy focus on the wrong areas.

“Comparing Australian prices with international pipeline transportation prices offers no assistance as the gas markets of the US and Europe are orders of magnitude greater than ours.

“The state of New York has greater demand than entire Australian east coast domestic market.

“The size of their markets and their relatively evenly dispersed population and demand centres means they are able to build expansive networks of wide diameter pipelines achieving economies of scale we simply cannot reach here.

“As the Australian Industry Group’s Innes Willox noted on 20 April, there have been no major changes in the pipeline and retail sectors of the domestic gas markets that explain the price rises offered to industry for gas contracts.

“The ACCC’s 2016 East Coast Gas Inquiry recommendations focussed primarily on pipelines and, as predicted, this has done little to influence gas supply or gas prices to industry.

Gas transportation costs have remained the same for a decade, and make up just 10 to 20 per cent of the delivered price of gas for large users connected to the transmission network.

“Instead of using discredited information to blame different sectors of the industry, it’s time to look at the whole supply chain.

“We hope that the new inquiry the ACCC will conduct over the next three years will achieve that aim and
provide some real solutions.”