WA Parliamentary Inquiry into Domestic Gas Prices
In 2011, the WA Parliament tabled its report on its Inquiry into Domestic Gas Prices. Key findings include:
- In recent years, the production side of the Western Australian domestic gas market has become highly concentrated. Such concentration raises legitimate concerns about the level of competition and effectiveness of this market.
- The prices of new domestic gas contracts in Western Australia are at least double those of the eastern states.
- Based on data published by the Department of Mines and Petroleum, the growth in total value of gas sold in the domestic market has exceeded the growth in quantity sold. This means that the average price of gas is increasing. This Committee has estimated the incremental value of gas (value of the additional gas (value of the additional gas sold) in 2009/10 was in the order of $13.80 per gigajoule. This figure is greater than the prices seen for new gas contracts because total value also reflects income earned from increases in the prices and a tightening in terms and conditions of existing contracts.
- An increase in domestic gas prices from historical levels is inevitable given the recent surge in production costs. Even so, insufficient competition amongst upstream producers is currently generating excessive prices.
- The current process underpinning the application for and renewal of retention leases lacks sufficient rigour and enables the stockpiling of gas reserves by incumbent producers. These reserves may include fields that are suitable for the development of domestic supplies.
- In the absence of a gas reservation policy it is unlikely that LNG producers would develop adequate domestic gas processing facilities.
- There is no evidence to suggest the state’s current approach to domestic gas reservation obligations has deterred LNG producers from pursuing development opportunities in Western Australia.
For a copy of the Inquiry’s Findings and Recommendations, click on this link