ACCC determined and reported that “... producer offers for 2019 supply in the Southern States have on average been relatively stable since January 2017, albeit with a slight decrease in early 2018. From mid to late 2017, the average of prices offered by producers in the Southern States was around $9–$10/GJ, being roughly around Victorian buyer alternative prices at that time. This means that during that period, producers in the Southern States offered gas to southern buyers at prices on average roughly equivalent to the maximum prices that would be expected to be offered in the Southern States in a well-functioning market. This may reflect a supplier’s expectation at the time of a supply shortfall in the Southern States in 2019.
However, from February to April 2018, the average of prices offered by southern producers was around $9–9.50/GJ. These offers, which were mostly to Victorian gas buyers, were on average well below Victorian buyer alternative prices during those months. The offers were more closely aligned with expected 2019 LNG netback prices at Wallumbilla, which as noted above had been increasing since mid-2017. This indicates that, during the early months of 2018, Victorian gas buyers were able to source gas from southern producers at prices that were below the price of sourcing gas from Queensland. This may reflect changing expectations about the supply-demand balance in the Southern States in 2019. ”
The domestic contract prices anticipated for East Australian gas are anticipated to be referenced to the Japanese LNG net-back prices, as determined at the Wallumbilla Hub, with addition of relevant pipeline(s) tariffs for the transport required to deliver the gas to the particular market(s). The reference to the international LNG price benchmarks provides a regular published guide to the price levels and trends. Of course the LNG price is also linked to a basket of oil prices, providing a further visible indicator of expected contract and spot pricing.