While conditions in the east coast gas market have eased considerably since the extremes reported in 2017, only action by governments and the gas industry to increase domestic gas supply can bring material price reductions into the future, according to the July 2018 Gas Inquiry Interim Report released by the ACCC today.

Based on current projections for the supply-demand balance, there will likely be sufficient gas in 2019 to meet demand.

Since the ACCC’s September 2017 report, conditions in the east coast gas market have improved, with a significant reduction in the Australian Energy Market Operator’s forecast demand for gas powered generation in 2019, and such forecasts can be difficult and volatile, and an increase in forecast gas production in the southern states.

Prices offered for gas supply contracts have dropped from the peak of over $20/GJ in early 2017 and have remained in the high-$8 to $11 range. Since mid-2017, there has been convergence between domestic gas price offers and LNG export parity prices.

Commercial and industrial gas users report that more suppliers are now offering gas for supply in 2019. However, these users report that market conditions remain very challenging for them.

While there will likely be sufficient gas in 2019, prices remain two to three times higher than historical levels. The lower forecast demand and increased southern production in 2019 is unlikely to be sufficient to lower gas prices.

“While gas market conditions have improved, these market conditions can change and the reality is that more gas is required to lower prices to users,” ACCC Chair Rod Sims said.

“Prices, and the market generally, are very challenging for gas users, who must constantly consider their investment plans, employment levels and even in some cases their continued operation.”

“To improve market conditions, the east coast gas market requires a greater level and diversity of supply, a more efficient transportation network, and greater transparency. To lower prices in the southern states, lower-cost gas must be produced in the southern states,” Mr Sims said.

“Gas production costs are increasing and gas prices in the east coast market are now shaped by international LNG prices, meaning that domestic prices are unlikely to return to historic levels.”

“The ACCC continues to urge state governments to adopt policies that consider and manage risks of individual gas developments rather than implementing blanket moratoria and regulatory restrictions,” Mr Sims said.

“Forecasts for LNG prices in Asian spot markets are trending up at the moment and there is a risk domestic gas price offers could increase to reflect these expectations.”

“The ACCC is seeking to improve market transparency and ensure commercial and industrial gas users are making decisions based on accurate and reliable market information,” Mr Sims said.

The ACCC is working to improve transparency in the east coast gas market by publishing prices offered and agreed for gas supply and the prices for transportation services. To provide gas users with better information about export parity prices, the ACCC will soon begin publishing an LNG netback prices series.

The ACCC is also working on improving the transparency and quality of reserves and resources information on future gas supplies and examining the cost components of retail prices for publication in future reports. The ACCC’s joint work with Dr Mike Vertigan’s Gas Market Reform Group will identify any remaining information gaps in the market and steps that should be taken to address these.

The ACCC’s next interim report is scheduled to be provided to the Treasurer in December. It will report on the long-term gas supply and demand outlook, the recent experiences of commercial and industrial users in securing gas supply, gas prices offered and agreed in the market, and gas transportation prices.

A copy of the report is available at Gas Inquiry July 2018 interim report.

Note to editors

An ‘LNG netback price’ is an export parity price that represents the minimum price that a gas supplier would expect to receive when supplying gas to the domestic market that would otherwise be exported as LNG. It is calculated by taking the price that could be received for a quantity of LNG and subtracting or ‘netting back’ the costs incurred by the supplier to convert the gas to LNG and ship it to the point of delivery.

The ACCC has found in this inquiry that LNG netback prices are a key factor that play an important role in influencing domestic gas prices, and that improved transparency on LNG netback pricing will assist to reduce the information imbalance between gas users and suppliers. The aim is to ultimately help to improve the competitive bargaining process.

The gas prices mentioned in this media release and in the ACCC’s Gas Inquiry 2017–20 Interim Report – July 2018 (unless otherwise stated) are ‘gas commodity prices’, that is, prices for the energy component of a gas supply agreement. These prices do not include any applicable transportation or other additional charges that may be passed through by retailers to gas buyers.


On 19 April 2017, the Australian Government directed the ACCC to conduct a wide-ranging inquiry into the supply of and demand for wholesale gas in Australia. The ACCC is required to submit interim reports no less frequently than every six months and provide information to the market as appropriate, with a final report to be submitted by 30 April 2020.

The ACCC’s first interim report, provided in September 2017, found that a substantial shortfall for the east coast was likely in 2018. Following publication of that report, the Australian Government and Queensland’s three LNG producers signed an agreement. The LNG producers agreed to offer sufficient gas on reasonable terms to meet any domestic shortfall over 2018 and 2019.

In December 2017, the ACCC provided its second interim report, which found that the Queensland LNG producers had made significant additional gas available to the domestic market. The ACCC found some improvements in the availability of gas and prices offered to gas users, but considered that the east coast gas market was still not functioning effectively, with high gas prices being offered and, for some participants, access to transportation impeding the flow of gas to the southern states.

In April 2018, the ACCC provided its third interim report, which found that prices offered to gas users had narrowed to a range of $8 to $10/GJ, announced that the ACCC is preparing to publish an LNG netback price series, and reported on our assessment on new transparency measures for pipeline services.

In addition to the ACCC’s regular reporting, there are a number of other areas the ACCC will be exploring over the course of the Inquiry which will be discussed in future reports, including:

  • conditions for, and pricing of, access to transportation and storage services
  • retailer pricing, costs and margins
  • reserves and resources reporting
  • key factors influencing domestic gas prices.