ACCC architects of the east coast gas cartel and domestic price gouging: IEEFA

Commenting on the Australian Competition and Consumer Commission’s interim gas report,  Bruce Robertson, Gas/LNG Australasia analyst, IEEFA said:

“The Australian Competition and Consumer Commission (ACCC) is one of the architects of the east coast gas cartel which has led us to a domestic energy supply crisis.

“The ACCC allowed both the takeover of Arrow Energy and BG Group by Shell substantially lessening competition on the east coast of Australia for gas supply. Shell has been very slow at developing the Arrow fields and this is one of the causes of high east coast gas prices.

“The ACCC has also done nothing to stop BHP and ExxonMobil forming a joint venture marketing company to market the gas coming out of the Bass Strait.  This is akin to allowing two of the major banks to get together to set interest rates for consumers.  It is simply breaking current consumer law.

“This latest ploy by the ACCC is to say that Australian consumers of gas in the southern states should pay 18% more for gas than the Japanese do for Australian gas.  The gas exported to Japan is transported from the production fields in South Australia and Queensland to Gladstone where it enters expensive LNG plants and goes through the energy intensive and expensive liquefaction process.  It is then transported all the way to Japan to customers who pay less than we do in Australia.

“What the ACCC fails to appreciate is that gas users in Melbourne get their gas from the Bass Strait as do users in South Australia and to a large extent Sydney.  Victoria produces more gas than it consumes and sends gas to Adelaide, Tasmania and Sydney.  For some reason only known to the ACCC, Sydney Melbourne and South Australian gas consumers  have to pay to bring gas from Queensland and end up paying more than Japanese customers do for gas produced in the Bass Strait.

“It is misleading of the ACCC to say that the moratoria and other regulatory restrictions in various states continue to prevent or impede development of new gas supply.  Onshore gas supply is simply too high cost in a world where there is a glut in supply and prices have crashed.

“There is permit sitting by Shell, amongst others, as they restrict supply to the domestic market.  All the while they are happy to supply gas at a loss to offshore customers.  Essentially Australians are subsidising loss making exports.  The ACCC is too embarrassed to call them out on their lack of development of existing approved gas fields.

“What this report highlights is that the gas companies despite having massive readily developable approved reserves are choosing to deliberately keep the Australian market short of gas.

“IEEFA has long maintained that the gas cartel has been price gouging the Australian consumer to prop up their loss-making export plants.  The ACCC report provides yet more evidence of this cartel like behaviour and the price gouging of domestic consumers that has been occurring.

“Using the ACCC methodology currently East Coast Australian gas consumers should be paying A$ 5.30/GJ not the A$10 to A$16 that the ACCC says we are paying.  Australians are paying 2 to 3 times the price we should be.  The gas cartel is inflicting a massive price gouge.

HoldfastACCC architects of the east coast gas cartel and domestic price gouging: IEEFA