AGL says it is not interested in exporting any of the gas it produces as part of its Gloucester Gas Project.
Responding to questions from the Advocate regarding the possible exporting of its gas, AGL said all gas extracted from reserves in the Hunter, Sydney and Gloucester regions would be sold to the NSW domestic market only.
Last week Sydney Morning Herald columnist Ross Gittins criticised the gas lobby and others for being less than honest in their claims that residents of NSW were facing a gas shortage.
He said when Australia gas producers start exporting their product to overseas markets in the next couple of years the price of gas domestically will rise regardless of whether there is a shortage or not.
In his paper, ‘Cooking up a price rise’, The Australia Institute’s Matt Grudnoff says that for many years, the prices paid for natural gas by consumers on Australia’s eastern seaboard have been a lot lower than prices paid in other countries.
The absence of plants to liquefy the gas so it could be exported meant our market was cut off from the world market.
Australia had no liquefaction plants because there was not enough gas to make them profitable.
The advent of fracking has changed that because it has enabled gas producers to begin exploiting the extensive deposits of coal seam gas across the country.
Queensland is in the process of building three new liquefaction plants near Gladstone to begin exporting its gas in the next year or two.
As a result, Grudnoff estimates the domestic price of wholesale gas will double or treble from between $3 and $4 a gigajoule to the world ‘netback’ price of $9 a gigajoule.
He says this is because Australian gas producers will have the option to sell to the Japanese, who are willing to pay $15 a gigajoule.
The difference between $15 and the netback price is the cost of liquefying the gas and transporting it overseas.
In his article, Mr Gittins says the argument put forward by gas producers that increased production in NSW will hold down gas prices in the State is economic nonsense.
He says any new gas producers in NSW will not be willing to sell to locals for anything less than the equivalent price they could get by selling to foreigners.
The Advocate addressed this issue in its questions to AGL last week, asking if companies producing CSG do begin to export gas for higher prices surely it made economic sense to do the same with the gas produced in this State?
The Advocate asked if that was not the case whether AGL shareholders would be supportive of a move where the company charged domestic customers less for the gas that it produced in NSW, knowing that they could be getting a better return on their investment by exporting it?
But AGL reiterated its commitment to the NSW market.
“AGL is not involved in exporting LNG,” a spokeswoman said.
“All of the gas reserves AGL extracts from the Sydney, Hunter Valley and Gloucester areas are committed to the NSW domestic gas market.
“AGL believes that it is logical to assume that the cost of delivering gas from its projects in Sydney, the Hunter Valley and Gloucester will be less than if sourced from interstate, because there are minimal transport and infrastructure costs compared with gas sourced from interstate.”