Gas Price Trends Review

202 Pages·2017·5.77 MB·English

by  Oakley Greenwood

OG
Oakley Greenwood
W
Gas Price
Trends Review
MARCH 2017
Revision 2
Disclaimer
The Gas Price Trends Review Report (Report) has been commissioned by the Commonwealth of
Australia as represented by the Department of Industry, Innovation and Science, and prepared by
an external consultant Oakley Greenwood Pty Ltd in consultation with EMS and MDQ Consulting.
The Gas Price Trends Review Report contains an aggregation of historical gas prices compiled to
provide users with an understanding of industrial and residential gas prices. The prices in the Report
are not an indication of future gas prices.
The Report has been developed and made publicly available to inform research, policy
development, consumers, and market participants about historical gas prices.
The Commonwealth, its officers, employees, or agents are not responsible for any negligence, loss
or damage howsoever caused, or for any expense or cost incurred by any person as a result of
access to, use of, or reliance on, any information or data contained in the Report.
The Commonwealth does not make any representation as to the currency, accuracy, reliability or
completeness of the information contained in the Report.
Readers should obtain their own independent advice before relying on the information contained in
the Report. The Report does not indicate a commitment by the Australian Government to a
particular course of action.
Acknowledgements
This report and data was commissioned by the Australian Government Department of
Industry, Innovation and Science. The report was prepared by Jim Snow, Jeff Thong, Angus
Rich and Tim Ryan of Oakley Greenwood, and Craig Langford of MDQ Consulting with data
input from Energy and Management Services. Front cover image courtesy of James Davies,
Fairfax Syndication.
© Commonwealth of Australia 2015
Ownership of intellectual property rights
Unless otherwise noted, copyright (and any other intellectual property rights, if any) in this
publication is owned by the Commonwealth of Australia.
Creative Commons Licence Attribution
CC BY
All material in this publication is licensed under a Creative Commons Attribution 3.0 Australia
Licence, save for content supplied by third parties, logos, any material protected by trademark or
otherwise noted in this publication, and the Commonwealth Coat of Arms.
Creative Commons Attribution 3.0 Australia Licence is a standard form licence agreement that
allows you to copy, distribute, transmit and adapt this publication provided you attribute the work. A
summary of the licence terms is available from creative commons license terms summary web
page. The full licence terms are available from creative commons full licence terms web page.
Content contained herein should be attributed as Commonwealth of Australia Gas Price Trends
Review.
ISBN: 978-1-925092-65-3 (online)
Department of Industry, Innovation and Science
Energy Division
GPO Box 9839
Canberra ACT 2601 Australia
Email: [email protected]
Web: http://www.industry.gov.au/GasPriceTrends
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Revisions
Number Description
1 “Energy Management Systems” changed to “Energy and
Management Services” in Acknowledgements.
Paragraph deleted in Section 8.2.4.
Figure 66 title changed.
Figure 67 title changed.
2 Charts and commentary updated to reflect update to SA
residential gas prices.

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Table of Contents
1 Executive Summary ............................................................................................. 1
1.1 Gas supply chain cost components .............................................................. 1
1.2 Industrial gas prices ..................................................................................... 2
1.2.1 Industrial gas price trends ........................................................................ 3
1.3 Residential gas prices .................................................................................. 5
1.3.1 Residential gas price trends ..................................................................... 5
2 Industrial gas price trends introduction ................................................................. 8
2.1 Domestic gas consumption .......................................................................... 8
2.2 LNG Exports ................................................................................................ 9
2.3 Australia’s wholesale gas markets.............................................................. 10
3 Key factors influencing industrial gas prices ....................................................... 12
3.1 Customer size ............................................................................................ 12
3.2 Load factor ................................................................................................. 12
3.3 Take or pay levels ...................................................................................... 15
3.4 Contract term ............................................................................................. 16
3.5 Producer vs retailer supply ......................................................................... 17
3.5.1 Retailer supply to large industrial customers .......................................... 18
3.6 Gas supply agreement price reviews .......................................................... 18
3.7 Queensland LNG impact ............................................................................ 20
3.8 Contract timing and implications in 2011-2015 ........................................... 20
3.9 Transportation charges .............................................................................. 21
3.10 Other gas fees and charges ....................................................................... 22
3.10.1 Carbon tax ............................................................................................ 23
3.11 Regional effects ......................................................................................... 25
3.12 Specific small industrial customers characteristics ..................................... 25
4 Industrial Customer Price History ....................................................................... 27
4.1 Victoria industrial gas prices ....................................................................... 27
4.1.1 Large industrial customer price trends .................................................... 27
4.1.2 Victorian large industrial customer gas price analysis ............................. 29
4.1.3 Small industrial customer price trends .................................................... 30

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4.1.4 Factors influencing Victorian industrial gas prices .................................. 32
4.1.5 Gascor contract ...................................................................................... 32
4.1.6 Introduction of new sources of gas supply to Victoria ............................. 33
4.1.7 Market Structure ..................................................................................... 33
4.1.8 Timeline of major influences on the Victorian gas market ....................... 34
4.2 Tasmanian industrial gas prices ................................................................. 35
4.2.1 Tasmanian large industrial gas price trends ........................................... 36
4.3 New South Wales and the Australian Capital Territory industrial gas prices 38
4.3.1 Gas prices for large industrial customers ................................................ 38
4.3.2 Influence of Cooper Basin gas prices to NSW and SA ........................... 40
4.3.3 Major factors influencing the Moomba gas market .................................. 41
4.3.4 New gas supply competition in NSW ...................................................... 45
4.3.5 NSW and ACT large industrial gas prices 2010 to 2015 ......................... 45
4.3.6 NSW small industrial customer gas prices .............................................. 45
4.4 South Australia industrial gas prices ........................................................... 49
4.4.1 Gas prices for large industrial customers ................................................ 49
4.4.2 Large SA industrial customer prices ....................................................... 51
4.4.3 SEA Gas deliveries to SA ....................................................................... 51
4.5 Queensland large industrial gas prices ....................................................... 51
4.5.1 Brisbane/South East Queensland large industrial customer gas prices .. 53
4.5.2 Brisbane and SEQ large industrial gas price history ............................... 55
4.5.3 Gladstone large industrial gas customers ............................................... 56
4.5.4 Gladstone large industrial customer gas price history ............................. 58
4.5.5 North West Queensland large industrial customer gas prices ................. 59
4.5.6 NWQ large industrial gas customer price history .................................... 61
4.5.7 Queensland large industrial customer gas price averages ...................... 61
4.6 East coast industrial gas price average ...................................................... 63
4.7 Northern Territory ....................................................................................... 65
4.7.1 Demand ................................................................................................. 65
4.7.2 Gas transmission.................................................................................... 66
4.7.3 Gas supply ............................................................................................. 68
4.7.4 Forecast demand ................................................................................... 68

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4.8 WA large industrial gas customer prices (Perth) ......................................... 69
4.8.1 Large industrial customer price trends .................................................... 69
4.8.2 WA large industrial customer gas price history ....................................... 71
4.9 National summary of large industrial customer gas prices .......................... 73
4.9.1 National large industrial gas price comparison ....................................... 75
5 Key drivers of future industrial gas prices ........................................................... 78
6 Residential gas price trends introduction ............................................................ 82
7 Key factors influencing residential gas prices ..................................................... 83
7.1 Retail price regulation ................................................................................ 83
7.2 Key drivers ................................................................................................. 84
7.2.1 Distribution charges ................................................................................ 84
7.2.2 Declining average consumption .............................................................. 86
7.2.3 Wholesale gas price ............................................................................... 87
7.2.4 Retail cost component and role of the retailer ......................................... 88
7.2.5 Pricing structures.................................................................................... 88
7.3 Environmental policies ............................................................................... 89
8 Residential price history ..................................................................................... 90
8.1 Victoria ....................................................................................................... 90
8.1.1 Victorian residential gas prices ............................................................... 90
8.1.2 Market overview ..................................................................................... 93
8.1.3 Regulatory environment ......................................................................... 96
8.1.4 Victorian seasonal tariffs ........................................................................ 97
8.1.5 Victorian household consumption ........................................................... 98
8.1.6 Victorian gas price components and trends .......................................... 100
8.1.7 Further developments .......................................................................... 102
8.2 Tasmania ................................................................................................. 103
8.2.1 Tasmanian residential gas prices ......................................................... 103
8.2.2 Market Overview .................................................................................. 106
8.2.3 Tasmanian household consumption ..................................................... 107
8.2.4 Residential price components and trends ............................................. 109
8.2.5 Further developments .......................................................................... 109
8.3 New South Wales ..................................................................................... 110

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8.3.1 NSW residential gas prices .................................................................. 110
8.3.2 Rural NSW residential gas pricing ........................................................ 112
8.3.3 NSW average residential gas prices ..................................................... 116
8.3.4 Market overview ................................................................................... 117
8.3.5 NSW household consumption .............................................................. 119
8.3.6 NSW residential gas price components and trends .............................. 122
8.3.7 Further developments .......................................................................... 123
8.4 Australian Capital Territory ....................................................................... 124
8.4.1 Residential gas prices .......................................................................... 124
8.4.2 Overview .............................................................................................. 126
8.5 South Australia ......................................................................................... 129
8.5.1 SA residential gas prices ...................................................................... 129
8.5.2 Market overview ................................................................................... 131
8.5.3 Regulatory environment ....................................................................... 133
8.5.4 SA household consumption .................................................................. 134
8.5.5 SA residential gas price components and trends .................................. 135
8.5.6 Further developments .......................................................................... 136
8.6 Queensland .............................................................................................. 137
8.6.1 Qld residential gas prices ..................................................................... 137
8.6.2 Market overview ................................................................................... 139
8.6.3 Queensland household consumption.................................................... 141
8.6.4 Queensland residential gas price components and trends .................... 142
8.6.5 Further developments .......................................................................... 143
8.7 Western Australia ..................................................................................... 144
8.7.1 WA residential gas prices ..................................................................... 144
8.7.2 Market overview ................................................................................... 147
8.7.3 WA household consumption ................................................................. 149
8.7.4 WA residential gas price components and trends ................................. 151
8.7.5 Further developments .......................................................................... 152
9 National summary of residential gas prices ...................................................... 154
9.1 National retail price comparison ............................................................... 156
9.2 Distribution network charges .................................................................... 159

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9.3 National retailer component ..................................................................... 159
Appendix A : Methodology ....................................................................................... 161
A.1 Approach taken to industrial price review ................................................. 162
A.1.1 Data gathering and validation ............................................................. 162
A.2 Residential methodology .......................................................................... 168
A.2.1 How average household gas prices are calculated ............................. 168
A.2.2 Residential tariffs: Market and Standing Offers ................................... 172
A.2.3 Retail gas supply chain components .................................................. 174
A.2.4 National average ................................................................................ 179

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Table of Figures
Figure 1 : Gas supply chain cost components ............................................................. 2
Figure 2 : Gas price trend for large industrial customers on new gas supply
agreements ................................................................................................................. 4
Figure 3: Average residential gas price trend by state ................................................. 6
Figure 4 : Annual gas consumption in Australia by sector for financial year 2013-2014.
.................................................................................................................................... 8
Figure 5: Annual gas consumption by sector and jurisdiction for financial year 2013-
2014. ........................................................................................................................... 9
Figure 6: Domestic gas consumption and LNG exports, with projections from 2014-15
.................................................................................................................................. 10
Figure 7: Victorian real and nominal large industrial gas prices (Melbourne) ............. 27
Figure 8: Victorian large industrial customer gas price components (Melbourne)....... 28
Figure 9: Victorian large industrial gas price components by % ................................. 28
Figure 10 : Victorian small industrial customer gas price components (Melbourne) ... 30
Figure 11: Victorian small industrial customer gas price components (country Victoria)
.................................................................................................................................. 31
Figure 12: Victorian small industrial wholesale price comparison. .............................. 31
Figure 13: Tasmania real and nominal large industrial customer gas prices (Hobart) 36
Figure 14: Tasmanian large industrial customer gas price components ..................... 37
Figure 15: Tasmanian large industrial gas price components by % ........................... 37
Figure 16: NSW & ACT real and nominal large industrial customer gas prices .......... 38
Figure 17: NSW & ACT large industrial customer gas price components ................... 39
Figure 18: NSW & ACT large industrial gas price components by %. ........................ 39
Figure 19: Historical Cooper Basin production over the last 15 years for gas and
ethane ....................................................................................................................... 41
Figure 20: NSW small industrial customer gas price components (Sydney) ............... 46
Figure 21: NSW small industrial gas price components % (Sydney) .......................... 46
Figure 22: Comparison of NSW and Victorian small industrial customer wholesale gas
prices ......................................................................................................................... 47
Figure 23: NSW small industrial wholesale price comparison. ................................... 47
Figure 24: SA real and nominal large industrial gas price trends (Adelaide) .............. 49
Figure 25: SA large industrial customer gas prices components (Adelaide) ............... 50

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Figure 26: SA large industrial customer gas price components by % ......................... 50
Figure 27: Queensland node map ............................................................................. 52
Figure 28: Brisbane & SEQ large industrial customer gas price history ..................... 53
Figure 29: Brisbane and SEQ large industrial customer gas prices components ....... 54
Figure 30: Brisbane and SEQ large industrial customer gas price components by % 54
Figure 31: Gladstone large industrial customer gas price history ............................... 57
Figure 32: Gladstone large industrial customer gas price components ...................... 57
Figure 33: Gladstone large industrial customer gas price components by % ............. 58
Figure 34: NWQ large industrial customer gas price history ...................................... 59
Figure 35: NWQ large industrial customer gas price components .............................. 60
Figure 36: NWQ large industrial customer gas price components by % ..................... 60
Figure 37: Weighted average large industrial customer gas price trend Queensland . 62
Figure 38: Weighted average large industrial customer gas price components
Queensland ............................................................................................................... 62
Figure 39: Weighted average large industrial gas customer price components
Queensland by %. ..................................................................................................... 63
Figure 40: East Coast weighted average large industrial gas price trend ................... 64
Figure 41: East Coast weighted average large industrial customer gas price
components ............................................................................................................... 64
Figure 42 : East Coast weighted average large industrial customer gas price
components % ........................................................................................................... 65
Figure 43: Map of the Northern Territory gas system ................................................. 67
Figure 44: Northern Territory average annual gas demand and forecast ................... 69
Figure 45: WA real and nominal large industrial customer gas price history (Perth) ... 70
Figure 46: WA large industrial customer gas price components ................................. 70
Figure 47: WA large industrial customer gas price components % ............................ 71
Figure 48: Australian weighted average large industrial gas price trend .................... 73
Figure 49: Australian weighted average large industrial gas price components ......... 74
Figure 50: Australian weighted average large industrial gas price components % ..... 74
Figure 51: Gas price trends for large industrial customers on new gas supply
agreements. .............................................................................................................. 75
Figure 52: Percent contribution of cost components to real industrial gas price
increases for 2002 to 2015. ....................................................................................... 77
Figure 53: WA large industrial customer wholesale gas pricing “bubble” ................... 79

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