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Gas industry warns of price spike

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article image The gas industry has warned that the eastern states will suffer from sky rocketing gas prices
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The gas industry has warned that the eastern states will suffer from sky rocketing gas prices in the coming years unless measures are taken to increase investment in the sector.

The industry warned that with wholesale gas prices more than doubling in the past decade from $3 to $8 a gigajoule, gas production needed to ramp up.

"It's quite possible if we don't access enough gas [before 2014] that there will be a constraint on the market as that initial demand increases fairly quickly," said chief executive of the Australian Pipeline Industry Association, Cheryl Cartwright.

"That price spike can be eased if there is encouragement for development of the gas resources."

The APIA released a policy paper calling for a change in investment policies which would see the development of gas prioritised.

"Rather than picking winners for power generation such as renewables....we would see a technology-netural encouragement of lowering emissions," Cartwright said.

"That means the more economical way of reducing emissions would get a chance and that would see gas as clearly a part of our energy mix."

However senior economist at the Australia Institute Matt Grudnoff blamed the price rises on the opening of the east coast gas market to the world through the construction of $60 billion worth of LNG export facilities in Queensland, ABC reported.

"The reason previously that the eastern market wasn't linked with the rest of the world was that the eastern market didn't produce enough gas to make an LNG facility viable," Grudnoff said.

"It's only the introduction of CSG and the massive expansion of CSG that's actually made those LNG facilities viable.

"Therefore it's this new CSG that's actually causing the price to increase."

The Australian Petroleum Production and Exploration Association rejected the suggestion that opening the LNG sector in Queensland to export markets has led to the price increase.

CEO of the eastern region, Rick Wilkinson says the main driver is the high cost of gas extraction.

"It's very costly to develop coal seam gas, he said.

"There is not $3 gas left in Australia, we have produced it, it's been contracted and now it's moving up to the next tranches of gas that are available."

"Bringing on additional, competitive gas is the right answer."

Vicky Validakis

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