The Commonwealth Government is undertaking a Gas Market Review. Submissions will be public shortly and we will provide a future blog post summarizing the views of the market.
We strongly support this review and provided a submission which highlighted the current domestic industrial gas market failure, its threat to the Future Made in Australia Plan and recommended a range of solutions that we believe can address this failure.
Notwithstanding decades of innovation and structural reform, the East Coast gas market is failing industrial customers. Despite falling domestic demand, real delivered gas prices have steadily increased. This has occurred alongside growing concentration in upstream reserves ownership, limited spare transmission capacity (with surplus capacity often removed from the market) and a contraction in retail-level competition due to increased market concentration.
The consequences of the market failure have been material: the closure of gas-reliant industrial and manufacturing facilities, a decline in Australia’s industrial capacity, and increasing stress on domestic supply chain resilience. This trajectory runs counter to the objectives of the Australian Government’s Future Made in Australia plan, which seeks to rebuild sovereign capability and strengthen the nation’s industrial foundations. Solving the gas market failure is also essential to ensuring an efficient NEM, a linkage EMX Energy has highlighted in its submission to the Nelson NEM review (a future blog post topic).
The key points of our submission were:
The Gas Market is failing, causes of which include:
- Policy Induced Supply Constraints
- LNG Producer Behaviour and Domestic Supply Erosion
- Fixed, Capacity-Based Contracting Structures
- Transmission Access and Long-Term Capacity Locking
- Concentration of Reserves and Processing Access
Policy actions to address this failure should:
- Restrict LNG Producer Access to Domestic Gas
- Mandatory Domestic Supply Obligation for LNG Exporters
- Mandate Transparent Trading at GSHs
- Reform access to Gas Processing Facilities
- Reform Pipeline Regulatory Frameworks
- Expand Capacity Trading Rules
- Implement Centralised Transmission Operation I
- Accelerate Market-Connected Storage Infrastructure A
- Monitor and Enforce Retail Market Competition
We look forward to continuing our engagement on this critical review and strongly advocating for the policy changes necessary to ensure that the gas market failure is addressed such that it recognizes, and actually supports, its key stakeholders – the industrial customer!