Last week, the Australian Competition and Consumer Commission (ACCC) released a draft decision following a review of its LNG netback price series in which the organisation said it would:
- continue to publish historical and short-term forward LNG netback prices extending to two years based on the Japan Korea Marker (JKM) spot prices.
- publish longer-term forward LNG netback prices extending to five years based on an oil index.
The ACCC said continuing to publish these results would help improve the series’ relevance for domestic buyers seeking longer-term domestic gas supply agreements.
“Our review found that for LNG producers on the east coast, exporting to Asia remains the main alternative to supplying the domestic Australian market,” said ACCC Commissioner Anna Brakey.
“Therefore Asian LNG prices, linked to JKM or an oil index, are the most relevant benchmark for calculating LNG netback prices for the east coast gas market.
“Our draft decision to publish a longer-term oil-linked LNG netback price series considered our recent examination of gas suppliers’ internal documents on their pricing strategies.
“These documents showed that prices in medium-term LNG contracts influence prices in the east coast gas market.
“We are very interested to hear parties’ views on this new proposal. We believe it’s appropriate to continue our current approach of only deducting avoidable costs when calculating LNG netback prices.”
Ms Brakey said the ACCC had engaged Wood Mackenzie Constultancy to provide expert advice on the development of international LNG markets and the relevance of different international prices to Australia’s east coast market.
The ACCC is now seeking feedback on its draft decision, and stakeholders are invited to provide submissions by Friday 30 July 2021.
A roundtable that brings gas producers, buyers and government together will be held on Tuesday 20 July 2021.
The ACCC’s final decision paper will be published by 30 September 2021.
A further review of the LNG netback price series is proposed to take place in 2024.
For more information visit the ACCC website.