Australia announces gas price cap in some states
The Australian Energy Market Operator (AEMO) has enforced a cap on gas prices in some Australian states owing to the recent rise in wholesale prices, it said on June 2. It has also announced a guarantee mechanism to call on more gas supply.
“Supplies remain tight, with high gas demand driven by heating needs with colder weather and for power generation,” it said. “Gas producers in Queensland have responded to shortfalls in the southern states, following AEMO’s activation of the gas supply guarantee mechanism yesterday.”
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AEMO said that the administered price cap of A$40/gigajoule (GJ) will remain in the Sydney and Brisbane short-term trading markets until June 7.
Victoria’s gas market also remains capped at A$40/GJ after reaching a cumulative high price threshold on May 30. This will remain capped until the cumulative price falls and remains below the threshold for a day, AEMO said.
“The situation is serious but it is being managed by our regulators very professionally, and it is important that Australians know that the new government has confidence in our regulators, in AEMO and in the Australian Energy Regulator to take the necessary action and to advise government accordingly,” Australia's new energy minister, Chris Bowen, told reporters.
Bowen did not rule out invoking the domestic gas security mechanism, which requires Australian east coast LNG exporters to divert some exports to the domestic market.
The minister, however, said that the mechanism cannot come into force until January 1 next year even if it was announced today. “There is a process outlined under the law of consultation which would have to occur before it could be implemented. It is a supply trigger, not a price trigger,” he said.
Australia’s peak oil and gas body Appea said that the decision by the AEMO to activate the gas supply guarantee is one of a suite of measures available to the regulator that have been designed to respond to situations like this.
“We understand current spot prices, representing only 10% to 15% of the industrial gas market, are under pressure and we are working with all parties to resolve the issue,” Appea acting CEO Damian Dwyer said.
“We stress that the majority of manufacturers are unaffected because they are on long-term contracts which, not long ago, were offered for this year at price levels around A$6/GJ to A$9/GJ,” he added.