Consumer gas prices are tipped to surge by 30 per cent over the next five years as a boom in Australian LNG exports puts pressure on local supply.
LNG exports are likely to triple to an annual value of $20 billion by 2020 due to strong demand from Asia, with Australia predicted to rival Qatar as the world’s biggest LNG exporter by 2018, an ANZ report out Thursday predicts.
In bad news for consumers, the ANZ report said the growth of Australia’s LNG export industry would put a strain on domestic supply, “which will lead to substantial price increases for Australian industry and households”.
ANZ economist Felicity Emmett said wholesale gas prices were expected to double as domestic supply tightened, which would translate to a 30 per cent increase in household gas bills over five years.
“Clearly in some states they will be more affected, Melbourne is going to be most highly affected,” Ms Emmett told reporters.
ANZ said gas bills for medium-use households in Sydney were expected to rise by 33 per cent, while in Brisbane they were likely to increase 29 per cent. Manufacturers, especially in the chemicals and metals industries, would also be impacted by rising strain on domestic supply.
“Without mitigation strategies in place, aggregate profitability of heavy gas consumers could drop by 20 per cent, with return on equity halved,” ANZ said.
For state and federal governments, the gas export boom would lead to higher taxation receipts through growth in mining company taxes, higher petroleum resource rent taxes, as well as increased state royalties.
However, the report noted that “high levels of foreign ownership in LNG companies means the bulk of profits will flow offshore”.
It also pointed out that with Australia’s LNG development phase winding up, investment in the sector would fall sharply resulting in fewer LNG-related jobs.
“Real household incomes will also be reduced by higher gas prices,” the report added.