Australia’s east-coast gas market, including SA’s Cooper Basin, is now “living under the shadow of supply uncertainty”, the head of the nation’s consumer watchdog has warned.

Australian Competition and Consumer Commission chairman Rod Sims outlined the threat to the country’s multi-billion dollar gas industry at the Eastern Australia’s Energy Market Outlook 2015 conference yesterday.

Sims said the quick “burst in demand” for liquid natural gas over a short period had “upended” the east-coast gas market.

“There was originally a strong presumption that CSG with some incremental supply from the Cooper Basin would largely supply LNG demand,” Sims told the Sydney gathering.

“Indeed, at one time it was thought that CSG in Queensland and unconventional gas out of the Cooper Basin was going to drive an LNG boom with 16 or more trains being mooted by different projects using gas sourced out of these areas.

“However, despite this early expectation of a gas production boom, the east-coast market seems to be perhaps one of the few gas markets in the world which is now living under the shadow of supply uncertainty.”

Sharing his insights from the ACCC’s inquiry into the east-coast gas market, announced in Apirl this year by Small Business Minister Bruce Billson and Minister for Industry and Science, Ian Macfarlane, Sims said the industry was under constant government scrutiny.

He drew attention to the need for adequate competition within the east-coast gas market.

“Gas seems to be an energy commodity in eastern Australia particularly amenable to government inquiries” he said.

“Nearly all state governments or parliaments have reviews under way into some aspect of gas markets or production.

“A consistent theme of previous inquiries, such as the Department of Industry and Science Market Study, is that they have not been able meaningfully to assess conflicting claims from gas suppliers and gas users about prevailing supply and demand conditions.”

Sims said aggressive cost cutting would be important to ensuring the success of the LNG projects.

“It is often said that linking the east-coast market to international gas markets means domestic prices netted back from international prices.

“However, with lower oil and LNG prices, and a falling Australian dollar, it is becoming increasingly unclear as to what exactly a netback gas price for the domestic market should be.”

Sims added developing recommendations for government policy was difficult due to the confidential nature of doing business in gas supply.

“Indeed many aspects of the east coast gas market are opaque and complicated,” he said.

Other points raised during his address included:

• The market was dominated by confidential, bi-lateral contractual arrangements, making price discovery almost impossible.

• Trading markets were immature and illiquid, with conflicting views as to their utility.

• The market was dominated by large players almost all along the value chain: be they gas producers and processors, pipeline operators or gas aggregators and retailers.