The nation's dominant gas transporter, APA, has warned that frequent rule changes are creating policy uncertainty and threatening to cause "sovereign risk" for investors in the gas and pipeline industries as large players in the industry point the finger at the company for acting to further its own interests.
Following a series of acquisitions, APA has emerged as one of the largest companies in Australia and dominates the movement of gas across the eastern states, with a network extending from Victoria and South Australia into northern Queensland.
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Turnbull's constitutional threat on gas
The Prime Minister is threatening to impose export controls on gas exports if domestic demand is not satisfied.
Gas consumers have been critical of the lack of transparency in the industry which has triggered studies and enquiries by the consumer watchdog the Australian Competition and Consumer Commission along with other bodies such as the Australian Energy Markets Commission.
At last week's gas summit between Prime Minister Malcolm Turnbull and gas industry leaders, a commitment was given to expediting a series of changes in the way the gas industry operates which are hoped to boost gas supplies as prices surge which are threatening the survival of whole industries.
In its submission to the Finkel Review into the electricity industry, APA argued limiting regulated pipeline owners from appealing regulator errors is a risk it is facing at present, along with access to pipelines being set "in an adverse manner to pipelines ongoing viability". Other risks include the lack of clarity around the future operations of Victoria's transmission market, it argued.
"We fear the [Finkel] Review panel has been supplied incorrect information for it to identify pipeline capacity currently as an area of concern," it warned in its submission.
Last week APA group executive Rob Wheals complained at a gas conference about policy disruption.
Underspending accusation
But one large gas provider, Lochard Energy, the arm of QIC which paid $1.8 billion for the Iona gas storage facility in Victoria, said underspending by APA has hampered efforts to develop the gas market.
"It is important expansion be driven by market requirements and not proposals of regulated pipeline owners who may not be acting in the best interests of the market as a whole," Lochard Energy noted in its submission.
"This requires a review and overhaul of the current access regime to facilitate efficient pipeline investment. For example, network constraints limit the ability of gas facilities like Lochard Energy to provide services.
"Victorian gas transmission owner APA systematically underspent the refurbishment and upgrade allowed by the ... regulator for 2013-2017 ... by a significant margin of 25 per cent."
Despite APA's concerns, large gas exporter APLNG threw its weight behind the moves to lift transparency in the domestic gas market which are the subject of a host of policy reforms being pursued by COAG's gas market reform group, AEMC, the ACCC and others.
Increased sharing of information, further development of gas market hubs and eliminating barriers to increase access to transportation capacity would all assist the company "with the required flexibility to sell additional gas into the east coast gas market", it noted in its submission to the review.
Much of the criticism of the surge in the domestic gas price is based on the size of the spike from the long-term price which ran at $3-$4 a gigajoule to more than $20 a gigajoule in some recent supply contracts.
As APLNG noted, the cost of development and production has risen "significantly" it noted, arguing that the "historical basis for gas prices is ... no longer an accurate reflection of current costs".
It pointed to recent Credit Suisse estimates that the wellhead costs for APLNG is around $6.25/pj, rising to $7.25 for Gladstone LNG and to up to $9.50 for Queensland LNG.