Australian Chart of the week | All gas demands are equal; but some are more equal than others

One of the key objectives of the federal government’s proposal for a ‘gas-led recovery’ – besides building a 250MW gas-powered generator (GPG) – is reducing gas prices through increased supply to domestic consumers. The proposal highlights the need to invest in domestic gas exploration and transportation, as well as create an ‘Australian gas hub’ in Wallumbilla in a bid to increase liquidity in spot gas in the east coast.

In this week’s ‘Chart of the week’, we investigate how different gas demand segments in New South Wales (NSW) have been trending and provide commentary on the potential impact of future supply on prices. As shown in the Fig. 1, the start-up of Liquified Natural Gas (LNG) exports in 2015 resulted in bullish trends in domestic gas prices with annual average prices in NSW tripling between 2014 and 2018. Whilst most demand settles on pre-agreed contract prices, spot prices are usually a good indication of potential price movements during contract negotiations. According to an inquiry from the Australian Competition and Consumer Commission (ACCC), contract prices offered pre-2020 were in the $9–12/GJ range. It is left to be seen how much of the current price softness flows into the next round of negotiations.

To keep reading, please log in to your account

Alternatively, please sign up to receive free market insight online and direct to your inbox

Related thinking

Power and gas networks

Australian Chart of the week | GPG: From middle of the order to the nightwatchman?

Across multiple reports published in recent weeks, the topic of changing supply dynamics has been a key focus as more renewable energy resources continue to enter the system including both grid-scale and behind-the-meter assets. Much of the commentary has focussed on the changing operation of coal generation in the face...

Low carbon generation

Chart of the week | One year on from ‘Beast from the East’

On 1 March 2018, during ‘Beast from the East’, National Grid issued a gas deficit warning for the first time since the system was introduced in 2012. The warning followed multiple gas supply outages, including South Hook LNG terminal, Kollsnes gas processing plant, and the BBL interconnector. This resulted in...

Power and gas networks

Chart of the week | Will the wholesale bulls finally run out of steam?

In light of the continuing running of the bulls, this week’s Chart of the Week offers a wholesale market snapshot. It observes what has been driving recent power, gas and commodity prices. It then seeks to offer an outlook for this bullish momentum. Though the chart shows day-ahead gas and power prices...

Power and gas networks

Chart of the Week | Low EU Gas Stocks Bullish for Summer Prices

The surge in gas demand across Europe from the very cold sting in the tail end of this winter may only have lasted a matter of days. However, the so-called ‘Beast from the East’ also leaves a legacy of increasing demand for gas this summer and low gas stocks. In...