25 Aug 2016
In recent weeks, several politicians, commentators, industry bodies and activist groups have repeated an Institute for Energy Economics and Financial Analysis claim that domestic customers pay 65 per cent more for Australian gas than Japanese customers do.
This is simply not true.
Australian domestic gas prices are NOT higher than prices prevailing in Australia’s major LNG export markets – let alone double the overseas prices.
A respected consultancy, EnergyQuest, has shown that the household cost numbers cited by the IEEFA make no sense.
A price of $A8.42/GJ in Japan is about the same as the price of Australian LNG on delivery to Japan – not the price of gas supplied to households. In August, Tokyo Gas was actually charging a standard residential customer $A41.67/GJ.
The IEEFA is comparing retail prices to wholesale prices – or apples to oranges.
Industrial gas prices in Japan, Korea and China are also much higher than in Australia. Yet an ABC report on 1 August quoted the Australian Industry Group as saying “Asian manufacturers can now buy Australian gas at half the price local manufacturers are paying”.
All Japanese gas is imported as LNG. In June 2016, the average import price of Australian LNG before regasification and transmission to local customers was about $A8.68/GJ. Tokyo Gas quotes the price for industrial customers as being ¥30/cubic metre or $A10.45/GJ.
Similarly, prices for Korean industrial customers were $A16.65/GJ in Q1 2016 and in August Chinese prices ranged between $A11.48 and $A26.69/GJ. These are much higher than Australian prices.
In its comprehensive east coast gas market inquiry, the Australian Competition and Consumer Commission recently found: “Some users raised concerns in the course of the Inquiry that domestic prices in the east coast gas market were now higher than gas prices paid by overseas users purchasing LNG on international markets. The evidence obtained by the Inquiry does not support these claims — domestic gas prices in the east coast gas market are still generally lower than prices paid by overseas users that purchase LNG.” (p 36)
As this chart from EnergyQuest shows, Australian domestic gas prices are NOT higher than prices prevailing in Australia’s major LNG export markets – let alone double the overseas prices.