CANBERRA: AGL Energy – the country’s second-largest electricity and gas retailer – is considering plans to import cheap gas even as the country is poised to become the world’s biggest liquefied natural gas exporter. The company says it firming up plans to build a facility to import LNG in to the country, with a final decision on any investment due in mid-2018. Australia is set to become the globe’s biggest LNG exporter that year, following more than $200 billion in LNG projects over the past decade, including three massive plants in Queensland.
AGL is mulling a potential investment of up to $300 million to build a floating or onshore terminal to import cheap gas for its key retail markets in NSW, Victoria and South Australia. It is currently evaluating potential sites. “Initially, there was a lot of skepticism, but we’re seeing positive support building for this,” AGL chief executive Andy Vesey said on Thursday after the company’s half year results, which included a sharp squeeze in its gas margins. AGL said its underlying earnings from the gas business will be at least $100 million lower in FY17 compared to last year, mostly as a result of supply constraints and reduced margins. Domestic gas prices in Australia’s east coast markets have continued to rise, despite a prolonged low price environment for oil and gas globally, as demand rises from export-focused LNG terminals serving overseas markets. At the same time, state government bans on onshore gas development have curtailed fresh supplies and added to concerns over pricing of gas for domestic manufacturers.
Australia’s competition watchdog has already asked the the federal government to overhaul rules governing the east coast gas markets, saying increasing uncertainty and complexity will lead to higher prices that will ultimately be borne by consumers. In the interim AGL, which needs to buy gas to supply customers, says it is continuing to engage domestically to source further competitive gas supply.
