“It also gives customers a price that they can build into their cost base with confidence, and still have a viable and profitable business,” he said.
Under the seven-year agreement, Senex will supply 11 petajuoles of gas from January 2023 to Adbri at the Moomba Gas Hub at a fixed price, in line with current market levels.
Its understood the contract is not in the double digit price range.
Earlier this month, anextreme surge in spot prices up to levels 10 times the average earlier in the yearhit the gas market, driven by multiple factors including a production disruption at the east coast’s biggest domestic gas supplier, increased use of gas for power generation because of coal unit outages, and a cold snap in the southern states.
Although prices have moderated from the extreme heights of $58 a gigajoule seen in Victoria earlier this month, it remained at over $15/GJ for the past few weeks.
Mr Davies has previously said long term contracts with customershave typically been in the $7-9 range.
Earlier this yearindustrial gas buyers had been optimisticthe federal government would get out its big stick to force down contract gas prices to the $4 to $6 a gigajoule (GJ) targeted under the government’s manufacturing taskforce.
But Adbri chief executive of Adbri Nick Miller said he was “pleased to execute this long-term agreement” to underpin its cement manufacturing operations in South Australia.
The head of the oil and gas lobby acknowledged “recent fluctuations in spot prices” but said the supply agreement between Senex Energy and Adbri shows the market is working.
“The truth is domestic users are paying considerably less for Australian gas over the long term than overseas markets and have been doing so for some time,” APPEA Andrew McConville said.
But new research from the Institute for Energy Economics and Financial Analysis (IEEFA) shows of the major exporters, eastern Australia’s wholesale contract gas prices are the 7th most expensive globally.
Author of the report, analyst Bruce Robertson, said contract gas prices in eastern Australia are over 3 times the price of gas in the US and nearly 5 times the price of gas in Russia.
