Economic Analysis of the Effects of Eastern Australia's LNG Exports in Asia-Pacific on Domestic Gas Users

Abstract

Rapid LNG trade in the eastern region will contribute a significant source of export revenue, or roughly A$20-30 billion per year over the next five years. However, along with a significant gain from LNG trade, major domestic gas users will also face higher gas prices, less security over long term contracts and more uncertainty over gas supplies generally. This paper develops a modelling approach and an applied analysis of the effect of LNG trade in Asia-Pacific region on major eastern Australian domestic gas users over the period 2015-30. During the study period, the average Net Present Value of consumer losses (at a discount rate of 5 per cent per year) is estimated to be from A$1.1 to A$1.4 billion per year. Among the major gas-using sectors, losses among the large industry sector are largest, accounting for half of total consumer loss or about A$450 to A$750 million per year. The electricity power sector is estimated to lose about A$194 to A$307 million per year. The losses from residential, commercial and other users is estimated to be about A$248 to A$405 million per year. The consumer loss in the eastern states is ranked (from top-to-bottom) by Queensland, Victoria, New South Wales and South Australia. Losses vary by different major domestic gas users by state. Show more