Crisis, what gas crisis? asks energy policy expert

THE LURE of high prices for gas sold to Asia will suck up most of eastern Australia's gas over the coming years, causing domestic prices to more than double.

Overseas demand - set to dwarf Australia's current domestic gas consumption by almost four times - is already making it attractive for gas producers to ramp up production massively.

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But that doesn't mean CSG production in NSW is inevitable, according to an energy expert.

Tony Wood, energy program director at the Grattan Institute, said the opening up of eastern Australian gas to this new export market (via three multi-billion dollar LNG facilities in Gladstone) was permanently shifting gas prices upwards.

But while the export rush was creating a "squeeze" on gas supplies, Mr Wood said the rhetoric about a "crisis" was mostly coming from industries facing higher gas prices and gas producers themselves.

"It is actually in the commercial interests of those who want to develop CSG in NSW to convince the government … that there is a crisis and they are the only saviours," Mr Wood said.

"You have to be a little bit sceptical about that sort of connection."

For the past 40 years, gas prices in eastern Australia have been around $3-4/giga- Joule, whereas the East Asian market is now paying $15-16.

Local buyers are already being charged up to $10/GJ for long-term supply contracts, which is simply the current Asian gas price minus the $6 cost to liquefy and transport the gas overseas.

Mr Wood suggested while the prices may settle in coming years, it was mostly a permanent upward adjustment caused by the exposure of the local market to these higher overseas prices.

But exploiting NSW coal seam gas resources is not the only way to secure supplies of gas in the future.

NSW could ramp up its conventional gas supplies via existing pipelines from Victoria and the Cooper Basin, store gas, or even switch to other fuels.

"When you think about the combination of social, environmental and economic costs, it will be cheaper than developing some of those other resources closer to where people are living," Mr Wood said.

"There's always going to be situations where even though there might be a resource there, it's just not going to be developed."

Topics:  csg gas

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