Mining and Heavy Industries

Gas prices still high despite export warning

Wholesale gas prices remained at the high levels seen throughout last year in first month of 2018, despite export restrictions the Turnbull Government has threatened to impose on gas producers if more supply is not made available to the domestic market.

Spot prices for gas were up 40% on average last year, and January data from the Australian Energy Market Operator indicates prices in Sydney and Melbourne both hit record monthly highs in January 2018, according to a report in The Australian.

Sydney gas prices averaged at $9.48 a gigajoule in January, up 6% from January 2016, and up from the average $9.20 seen throughout 2017. Melbourne prices averaged $8.70, up 3% from January 2016, and level with the average price seen throughout 2017.

There would be hope gas prices will drop after January, given it is a peak time for demand.

But there are growing concerns gas companies have not reacted strongly enough to threats from Prime Minister Malcolm Turnbull, that their export volumes will be limited if the domestic market is not properly served.

Turnbull made the announcement last year amid talk that major industrial gas buyers were being offered new long-term contracts with prices as high as $15 a gigajoule.

Gas producers have said a return to historical gas prices of between $3 and $4 a gigajoule is unlikely, however, due to the high cost of getting more gas production online.

“I’ve always said I think the right price is around that $7 to $9 range,” Santos boss Kevin Gallagher reportedly told The Australian.

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