I'm moving this one across to the Gas Import Jetty discussion group.
AGL does not export from Australia. So unfortunately, we are not exposed to and cannot comment on the exact pricing being achieved by sellers of LNG from the projects in Australia’s Northwest, Darwin and Gladstone.
The majority of internationally traded LNG is priced on contracts linked to oil price. This provides pricing transparency and allows buyers and sellers the ability to use financial derivatives to manage their price exposure. AGL will be exposed to the same markets and pricing structures as the export projects.
AGL currently sources its gas from local producers. As a retailer of energy, we are only able to read the current market. As the supply sources offshore in Victoria are in decline, AGL has to seek new supply sources. As suggested by the market, to pipe gas long distances from Queensland is very expensive (around $2.98/GJ) to transport from Queensland to Victoria) and is limited by lack of capacity on the pipeline out of Queensland.
As converting natural gas to LNG through liquefaction results in the gas in liquid form taking up only 1/600th of its original volume it is an efficient and cost-effective ways to transport gas long distances and is not constrained by the lack of pipeline capacity in the domestic network.
As an example, in April 2019, AGL’s General Manager of Energy Supply and Origination, Phaedra Deckart presented to the International Conference and Exhibition on Liquefied Natural Gas in Shanghai, China. Based on figures available at the time, the presentation highlighted how the LNG price in Asia currently sits as USD8/MMBtu (1 MMBtu converts to 1.055 GJ). While pricing always has the ability to change depending on the market at the time, this demonstrated how LNG could be imported at Crib Point for AUD $10.11/GJ. In comparison, the price Victorians pay for natural gas diverted to Melbourne from Coal Seam wells in Queensland was priced at $11.89/GJ.
The chances of gas returning to historical prices is slim. The reality is that the current price (about three times the historical price), will likely remain the price of gas even if this project is put in place. This is due to several factors but includes the international market and the dwindling supply. By increasing the supply of gas available, the LNG project will put a cap or ceiling on this value.
I hope this provides some insight into the pricing process. Does this clarify it for you?
I hope the following quote from this excellent article by Australian energy anayst Bruce Robertson might go some way to answering your very relevant question:
“So high are the prices we pay, that these corporate gas giants can absorb the costs of liquefying the gas – turning it into LNG that is – shipping the gas and then re-gasification; that is, turning it back into gas again. Each of these processes is expensive in itself. Cumulatively they add up to around A$6.70/GJ (per gigajoule).
There is no gas “market” on the east coast of Australia; rather a tightly controlled cartel.
This cabal, which we have no hesitation in calling the East Coast Gas Cartel, saw the opportunity to starve the domestic market of gas and force up prices.
They deployed in-house economists to propagate the myth of gas shortages.”
Excellent, thanks for posting, it goes to show that AGL and Origin especially are lying to us, telling us they are moving towards renewable energy yet still supporting the whole ripping off system that is in place to make shareholders richer. When will it stop? We have seen the promises from the Government to bring prices down and yet nothing has been done, why? Because they are supporting those that support them, two way street, nothing for the many tax payers who are struggling more and more each day. Now they want to frack the NT! Gas is not renewable but a very costly and water wasting energy source. It needs to be phased out. The Westernport gas plant if it goes ahead will do nothing to bring prices down it is only for the Gas cartel to make even more money.