Domestic gas prices in southern and north east Australia experienced significant variations during winter 2016. These price variations were due to a combination of both high demand and constrained supply.
Typical cold weather over July and August resulted in increased household gas usage to deliver heating to consumers, particularly in the state of Victoria. Demand from gas fired electricity generators in South Australia was also high throughout June.
Factors that contributed to the constrained supply included:
- The continued decline in gas production from Victoria’s Port Campbell region;
- Iona underground storage facilities reduced capacity to supply the market in July and August, following extensive use throughout June;
- The Longford gas production facility was already operating at full capacity and unable to assist; and
- The unexpected curtailment of a gas supply source in Queensland, resulting in the affected participant needing to purchase more gas from the wholesale markets across the east coast.
This winter all three of Queensland’s liquefied natural gas (LNG) export projects were operating. At full production the demand from these projects is forecast to reach approximately three times the level of domestic demand. The LNG export projects all source gas from the broader domestic gas market, increasing demand, however also supply gas domestically dependant on overall market conditions.
This report highlights the key drivers of the significant price variations in July and August.