Energy prices tipped to rise - push for 'clean' gas heralds new approach to power in Queensland
5 February 2008
Tony Grant-Taylor
ELECTRICITY and gas prices in Queensland could be headed significantly higher.
This is likely following Queensland Gas Co's decision to investigate a Gladstone liquefied natural gas plant in association with the UK's BG Group.
Queensland will in future look to so-called ``clean'' gas for an increasing proportion of its electricity supply as well as to satisfy rapidly rising industrial and residential demand.
However, like other coal seam gas producers in Queensland, QGC, with the help of BG (formally British Gas), is out to get a higher price for its product than it can currently command in local markets.
To do that it is looking, together with Santos, Arrow Energy and Sunshine Gas -- who with Origin Energy are the state's major coal seam gas suppliers and developers -- to tap the huge emerging demand in Asia and elsewhere for LNG.
Offshore markets pay prices linked to world oil prices that are two to three times those currently being paid in Queensland.
The Sunshine State has been protected from high energy prices by the abundant supplies of low-cost coal.
Over the past couple of years, gas prices in Western Australia, which pioneered Australia's LNG industry and ships large quantities of North West Shelf gas to Asia, have doubled.
Opinion is mixed on whether Queensland faces a similar future.
Prices will certainly rise and will be affected even more once a national price on carbon dioxide emissions is set either by government decree or an emissions trading system, because carbon pricing will increase the cost of coal for power generation.
But the extraordinary success in recent years of the coal seam gas players, who have been proving up new reserves at a pace not imagined even five years ago, suggests local supply will continue to grow strongly.
In an assessment of the burgeoning local industry late last year, consultants PricewaterhouseCoopers said: ``Queensland, in particular, is well positioned to develop a world-class centre of excellence for exploration, field design and development and gas trading and marketing''.
But PwC's Jon Hubbard and Derek Kidley cautioned that: ``The potential impact of increasing prices could make the east coast a less attractive place for those reliant on significant quantities of gas.''
For the time being they thought the potential impact was likely to be ``significantly mitigated by the entry of new participants (into the CSG industry) and the coming to market of new production assets''. But they noted the WA experience as has ACIL Tasman executive director Paul Balfe.
Mr Balfe said recently: ``Cheap coal has (traditionally) kept a lid on gas prices.
``Emission trading will tend to tilt the scales in favour of gas because of its lower emission intensity, providing a value boost for gas-fired electricity generators who may find its way into higher gas prices''.
He said if LNG became a major industry, diverting large amounts of gas from the domestic market, that could put upward pressure on prices.
Gas prices
* Queensland insulated from high gas prices because of coal supplies
* Prices in WA doubled in recent years
* National price on carbon dioxide emissions could be an impact
* New industry could be turned off relocating to Queensland
Copyright 2008 News Ltd. All Rights Reserved
The Courier-Mail
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