Gas Prices in Australia to Stay Affordable Until 2025, Leaving Energy Companies on Edge

Australia: The Australian government has announced its plans to extend the limit on domestic natural gas prices until July 2025 in a bid to guarantee a stable supply of Australian gas at reasonable costs. This move has left energy companies operating in Australia anxious, as the previous cap on domestic gas prices, which was introduced in December last year, has already put at least one investment project on hold. The cap, which was initially intended to control the escalating gas prices, was set to expire at the end of 2023.

The government is outlining plans to extend the price cap until mid-2025. Small gas producers supplying only to the domestic market will be exempted from the cap, as will larger producers who commit to ensuring sufficient natural gas supply for the domestic market. The draft proposal, known as the Gas Code, is currently open for consultation until May 12, 2023.

The introduction of the Gas Code is aimed at ensuring that Australian users have access to reasonable gas prices while also providing the required assurance to producers for investment in gas supply. Furthermore, the Gas Code will enable LNG producers to fulfill their export commitments, thereby securing Australia's position as a dependable trading partner.

Australia's latest proposals for energy market interventions have raised concerns among its main energy trade partners and allies. These interventions may also undermine new investment plans in Australian natural gas and other energy resources. The Australian government has already proposed reforms to the Australian Domestic Gas Security Mechanism (ADGSM), which aim to guarantee a sufficient supply of natural gas to meet the forecast needs of Australian gas consumers. The reforms, if required, will control LNG exports.

Foreign investors may challenge the decision to impose a gas price cap and propose government intervention in LNG exports. These measures could potentially pose a risk to Australia, which is a signatory to multiple investment treaties where prominent LNG companies are established.