WHILE the trajectory of Australian gas prices remains uncertain, National Australia Bank is forecasting a rise in retail prices as new long-term contracts are drawn up in the wake of LNG exports starting from Queensland.

In NAB’s natural gas market update released in September, the bank said the commissioning of Queensland LNG export terminals would see the Eastern Australian wholesale market exposed to netback parity prices for the first time.

“However, considerable uncertainty remains on the future price path of Australian natural gas,” NAB said.

In NAB’s natural gas market update released in September, the bank said the commissioning of Queensland LNG export terminals would see the Eastern Australian wholesale market exposed to netback parity prices for the first time.

“However, considerable uncertainty remains on the future price path of Australian natural gas,” NAB said.

Eastern Australia has enjoyed relatively low natural gas prices for the last four decades, supplied by low cost fields in the Bass Strait and Moomba, South Australia.

“Importantly, supply was too low to justify liquefaction and export from these fields, leaving eastern Australia as a gas island not exposed to world prices,” NAB said.

But this historical landscape is poised to change following the discovery of extensive coal seam gas reserves in Queensland which has underpinned the construction of three LNG export terminals in Gladstone. The BG Group-led QCLNG project remains the first cab off the rank with first exports in the fourth quarter of 2014 remaining on track.

NAB noted recent reports suggesting new wholesale contracts could more than double from around $4 per gigajoule (GJ) to in excess of $9/GJ due in part to Queensland’s LNG export projects coming on stream. This would lead to higher gas prices for residential consumers, industry and gas powered electricity generators.

“The effects of higher prices are already being felt by gas powered generator,” NAB noted.

Conversely, NAB said it was possible that domestic gas price increases could be muted by changing international dynamics.

“While East Asian LNG demand has been increasing steadily for the past five years, nuclear restarts in Japan may dent demand,” the bank said.

“Likewise, LNG supply is set to increase as a result of booming US supply and a number of LNG export terminals in planning or under construction across the Pacific rim.”

In the medium term, NAB said the outlook for international LNG prices was clouded.

“While demand in East Asia remains strong, forthcoming LNG export capacity in Australia and other areas combined with strong US shale gas supplies could place downward pressure on prices,” it said.

“We expect LNG prices in East Asia to remain reasonably stable for the remainder of the year in line with low oil price volatility.”

NAB said the outlook for Australian gas prices was also unclear.

“While it is possible that wholesale spot prices will decline in the near term, we expect that retail prices will rise as new long term contracts are written in light of LNG export from Queensland,” the bank said.