Australians are slugged more than twice the price for gas than Americans, despite both countries being exporters of the energy source.
For Victorians, who are the largest consumers in Australia, gas cost $10.82 per gigajoule on Tuesday, while Americans were only paying $4.25/GJ.
Energy Economics and Financial Analysis expert Kevin Morrison told Daily Mail Australia the major difference between the two gas producers was the amount of US competition.
‘In the US, you have the big companies such as Chevron and Exxon as well as the likes of Shell are there in a major way,’ Mr Morrison said.
‘In Australia, the biggest coal seam gas producers are three consortiums in Queensland, and the majority of the gas they produce goes offshore.’
Australians are paying more than double the price for natural gas than Americans do despite both countries being exporters
The other major gas producer for eastern Australia is the joint venture between Exxon and Woodside in the Gippsland Basin region of southeast Victoria.
‘They and the Queensland consortiums control three-quarters of the gas reserves in eastern Australia,’ Mr Morrison said.
‘If you have a handful of producers, they would know what each other is doing, and they would be able to keep the markets from being too flushed with gas.’
In December last year, the Albanese government legislated a price cap on gas of $12 per gigajoule for 12 months and has since extended this to 2025.
The gas sector heavily criticised the move saying the cap and a new code aimed at ensuring a ‘fairer’ supply would cripple investment.
Woodside chief executive Meg O’Neill told a conference of major oil and gas producers in May that the market interventions would likely backfire.
‘When there’s uncertainty around the market in which we’re investing, it gives us pause,’ Mr O’Neill said.
An energy expert says the difference with the American gas market is the amount of competition compared to Australia
Mr Morrison was not convinced.
‘I think they are stretching it,’ he said.
‘The price they are getting is more than double what they would be in the US operations for selling the same molecule of gas.
‘Somehow, here in Australia, it is not quite enough, but they would be more than happy to accept a price anywhere near that in the US.’
‘If you look through the balance sheets for any gas producer in Australia their costs of production are nowhere near $12 per gigajoule.
‘They have a really healthy margin built in at that price.
‘These complaints reflect the power of the industry they just don’t like being told what to do.’
Mr Morrison said there were many industrial gas consumers who are operating on much thinner margins.
‘Going up to $12 a gigajoule will impact their operations, their margins and their ability to supply their products to their consumers,’ Mr Morrison argued.
Other gas-producing regions such as the Middle East or Indonesia, ensure their citizens get cheap energy.
‘If we take the Middle East as a whole, it’s all state-controlled,’ Mr Morrison said.
Energy Economics and Financial Analysis expert Kevin Morrison said gas distributors have been making big profits
‘The locals feel that oil and gas is a natural right. It’s all subsidised, so they pay next to nothing.’
Another factor that drives up prices for Australian consumers are the charges gas distributors charge to use their pipelines.
Even though a regulator sets the amount distributors can charge Mr Morrison said the gas distributors got a very sweet deal with generous margins protected by the guidelines.
‘They are pretty well guaranteed profits,’ Mr Morrison said.
‘Let’s just say pipeline company A want to spend a $100 million on their network, they are guaranteed an X per cent return.
‘Let’s say it is eight per cent, that means they are guaranteed $8 million
‘If company A says “next year we want to spend $200 million” they are guaranteed a profit of $16million. So it just goes up like that.
‘The more you spend the more money you get back.’
Distributors can also get away with gold-plating their networks by inflating the amount they need to invest.
‘They can come up with any technical reason that could blindside somebody who doesn’t have the technical capabilities the company has,’ Mr Morrison said.
Another potential problem are the close ties between the handful of huge gas networks and the regulator.
‘There’s a revolving door,’ Mr Morrison said of staff moving from the regulator to high-paying jobs in the industry.
‘It applies in the oil sector as well. I am sure you find it in any regulated industry.’
Australia only has around two per cent of the world’s known gas reserves but that more than meets local demand with 80 percent of the resource going to nations such as Japan and Korea.
In June competition watchdog the ACCC warned southeast Australia could face gas shortages over winter if local suppliers didn’t put more aside for domestic use.
Around 80 per cent of the natural gas produced in Australia is liquefied for expert to Asian countries (pictured Origin Energy’s Australia Pacific liquefied natural gas facility at Curtis Island in north Queensland)
Mr Morrison thought this risk was overblown.
‘These reports come out about two to three times a year and they seem to always come to the same conclusion that we are looking at a shortage,’ Mr Morrison said.
‘But these shortages never actually eventuate.
He pointed out Australia’s exports had fallen.
‘The exports from Gladstone and the three energy consortiums to customers in the Asia Pacific are down about four per cent this year,’ he said.
‘It’s been quite a drop-off from South Korea and Japan and while China is buying a little bit more it is still well down on where it was two years ago.
‘Therefore if they aren’t exporting as much where is that gas going? Surely that gas could come into the domestic market.’
The ACCC is predicting a surplus of gas for 2024 that Mr Morrison said would equal the annual amount consumed by South Australia.
Mr Morrison said the West Australian gas market is almost entirely separate to the east coast’s.
‘There’s no pipelines traversing across the continent, it would just cost too much even though people have been talking about it for the last 50 years,’ he said.
In Western Australia the state government sets aside an amount of gas for the state’s use.
‘They have some very large industrial consumers, we all know Western Australia is a big producer of natural resources,’ Mr Morrison said.
‘There’s some big companies involved, the likes of Alcoa, so they aren’t sweating on where the gas is going to come from as the industrial or residential users can do on the east coast.’