“First, more sources of gas supply for south eastern Australia in particular are needed to constrain gas prices.”
“The key point is that the effect of the level of LNG netback prices on domestic gas prices depends more than is realised on the level of competition in the market,” Mr Sims said.
“With many gas suppliers competing for business their (seller) alternative is to send gas to Queensland for export. With few gas suppliers competing for business you need to ask why would they sell their gas for less than the buyers alternative of buying gas from Queensland?”
“The difference in the domestic price of gas, therefore, depends on the level of competition to supply gas, and can be double the transport cost to Queensland, which is a large amount,” Mr Sims said.
This also illustrates the importance of gas transmission and transport costs.
“Second, therefore, we also have to ensure that regulation, or the threat of regulation, is effective as it applies to natural monopolies like gas transmission pipelines. This currently does not seem to be the case.”