22 May 2024

New research from Frontier Economics shows the significant price impacts to Australian consumers and industry if the domestic market were to rely on imported liquefied natural gas (LNG).  

APA has today released the report, LNG Imports on End User Prices, which shows that relying on imported LNG would drive gas prices higher for both residential and industrial customers in Melbourne, Adelaide, and Sydney.  

The impacts are notably more significant for industrial customers, which could face annual price increases of between 14 and 25 per cent if they were reliant on imported LNG gas during winter.  

The price increases could be even greater if LNG were to set the price all year round – between 55 and 100 per cent for industrial customers.   

The research also shows that relying on imported LNG would result in international gas prices impacting the wholesale gas price in Australia, exposing the domestic market to global energy shocks. 

APA CEO and Managing Director Adam Watson said governments across Australia have a role to play in prioritising regulatory reform that support investment in new domestic gas supply. 

“The most efficient and effective way to decarbonise Australia’s energy system is to retire coal and diesel, and build-out renewables supported by domestic gas. 

“The 2024 AEMO GSOO shows a deteriorating gas supply outlook in Australia, highlighting the importance of continuing to support investment in new and existing domestic gas supply. 

“Without gas, we’re going to see major disruptions to energy security. Energy costs will also increase and we’ll be keeping the coal and diesel generators going for a long, long time. 

“LNG import terminals will deliver gas to Australia that’s significantly more expensive than domestically sourced natural gas. And Australia’s industries, most of which are dependent on gas and are competing on the world stage, can’t absorb higher costs. 

“So we need to bring more domestic gas to market, and we need to do so as quickly as possible by removing the barriers to investment. We need the right policy and regulatory settings to deliver timely investment in new domestic gas supply and infrastructure for Australian households and industry. 

“The facts speak for themselves. It’s domestic gas – not coal, not diesel, and not LNG import terminals – that will provide the lowest cost solution for backing up our renewable energy build-out.” 

Frontier Economics Director Andrew Harpham said given the findings, the case for policy settings which encouraged more domestic gas production were compelling. 

“It’s been clear for at least a decade that we’re going to need new sources of gas supply,’’ Mr Harpham said. 

“Policy generally has made new investments in gas production in Australia really challenging, whether it’s restraints on where you can explore for or develop gas reserves which we’ve seen in a number of jurisdictions, or whether it’s broader policies about trying to bring about an end to the use of gas for certain types of customers. 

“We’re going to continue to rely on natural gas for the coming decades. Some industries may actually use more gas than they have in the past, particularly if we want a smooth transition for our electricity market. 

“It’s not too late to pursue policy settings that help the domestic producers of gas make these investments to provide lower cost, secure supplies of gas in the future.’’ 

Frontier Economics modelled the price impacts of options to alleviate predicted gas supply shortages for residential and industrial customers in Sydney, Melbourne and Adelaide.  

The study considered two options:  

  1. Domestically sourced gas from either Queensland’s Bowen and Surat Basins or the Northern Territory’s Beetaloo Basin via new and existing pipelines; or  
  2. Internationally sourced LNG through two proposed LNG import facilities at Port Kembla in NSW, and Geelong in VIC. 

The full report can be viewed here