Gas cartel upgrades pipeline


The gas cartel wants a pat on the back:

APA Group will spend $20m to upgrade a pipeline in Queensland to transport new gas supplies from Senex’s new $1bn expansion, after the two companies signed a 20-year agreement.

The deal will facilitate much-needed gas to Australia’s east coast as the region struggles with a looming catastrophic shortfall emerging as soon as 2026.

Putting it a little more honestly, after boycotting the Gas Code of Conduct, the gas artel has decided to upgrade flows to southern Australia.

Here’s why:

The ongoing extraction of high supernormal profits, combined with decisions that continue to reallocate costs and risks to consumers, highlights the urgent need for better planning around the phase-down of gas networks.


In its recent consultation on the development of an energy and electricity sector plan, the Department of Climate Change, Energy, the Environment and Water stated: “Regulatory settings will need to be considered as electrification accelerates and use of gas networks declines.”

This represents an opportunity to produce guidelines on how the AER should allocate stranded asset risks equitably between consumers and networks. It’s critical that it is developed in close collaboration with state governments – whose policy decisions have material impacts for how the transition to all-electric homes is managed.

This guidance must address the fact that under the current risk-sharing arrangement, Australians overpaid $1.8 billion to gas networks. In a future where residential gas is in decline, gas networks are now asking consumers to wear their potential losses. The failure of governments and regulators to address this issue could mean a costlier and risker transition for consumers.

The AER is comprehensively failing to regulate the gas cartel on the standard ‘cost plus’ monopoly model.

Why wouldn’t the cartel expand the pipeline given the economic rents on offer?

You will pay for this via international prices plus pipeline rents even though it is your own gas extracted for little more than $1Gj cash cost.

Build southern gas storage, force the cartel to pay local prices with export levies, and run the pipeline 24 hours per day.


Or nationalise the gas cartel.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.