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Gas outlook ‘concerning’ with government urged to act to alleviate worsening ‘energy security risk’

Article source: ABC News

The Federal government has been urged to consider intervening in the energy market, amid concerns of a gas shortage that could lead to higher prices, according to the latest report by the consumer watchdog.

The Australian Competition and Consumer Commission (ACCC) has released an interim report of its inquiry into gas supply along the east coast.

It noted that while Australia has “relatively abundant gas resources”, most of it is produced for export and substantial volumes were required for the domestic market next year to avoid a shortfall.

The outlook for 2023 is very concerning and is likely to place further upward pressure on prices, which could result in some commercial and industrial users no longer being able to operate,"

“This is a significant deterioration in conditions relative to what we projected for 2022 at the same time last year and presents a real risk to Australia’s energy security.”

It has recommended that the government consider intervening in the market, by pulling what’s known as the “gas trigger” to ensure there is enough supply.

The ACCC has predicted a shortfall of 56PJ next year, which is equivalent to about 10 per cent of domestic demand, the largest projected supply shortfall since 2017.

“This represents a further [almost tenfold] deterioration in conditions relative to what was forecast for 2022 at an equivalent time last year,” the report said.

The ACCC has partly pointed the blame at liquefied natural gas (LNG) exporters.

“LNG exporters are expected to contribute to the shortfall in 2023 by withdrawing 58 PJ more gas from the domestic market than they expect to supply into the market,” the report said.

The shortfall is expected to mainly affect New South Wales, Victoria, South Australia, Tasmania and the Australian Capital Territory, with less significant consequences for Queensland.

To avoid the gas shortage, the ACCC has encouraged LNG exporters to act immediately to increase domestic supply and has recommended the government work with exporters to ensure they supply more into the domestic market.

“LNG producers will need to divert a significant proportion of their excess gas into the domestic market,” the report stated.

It has also recommended the federal government go further and initiate the first step of the Australian Domestic Gas Security Mechanism (ADGSM), more commonly known as the ‘gas trigger,’ and formally determine if 2023 will be a shortfall year.

The gas trigger is an emergency provision, which allows the Resources Minister to directly intervene in the gas market and impose export controls to ensure there are adequate supplies for use in Australia.

The government is yet to outline whether it will follow the recommendations but in a statement, Federal Treasurer Jim Chalmers said he was concerned by the findings.

The ACCC's latest gas inquiry report highlights some alarming features of the east coast gas market,"

“The government takes these findings extremely seriously and will shortly respond to the ACCC’s recommendations.

“I urge gas producers to do the right thing by Australians.”

The ACCC said other measures that could also help with supply issues include sourcing additional gas from the Northern Territory and withdrawing gas from storage.

Article source: ABC News

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