In recent years, the natural gas industry has seen the development of new gas fields and facilities to meet the demand for liquified natural gas (LNG) for the export market. These developments have, and will continue to have, downstream effects on domestic natural gas prices and supply. In July 2015, the Australian Energy Market Commission (AEMC) approached the ABS to develop a price index for wholesale natural gas in the domestic market, covering the purchase of gas directly from producers primarily through bilateral contracts, and initially focussed on the east coast gas market.
The ABS subsequently undertook extensive consultation with industry participants in both the east and west coast markets before outlining a development proposal for a natural gas PPI in Information Paper: Developments in Producer Prices Indexes for Natural Gas, Dec 2015 (ABS cat. no. 6427.0.55.008). The proposal also considered the requirement to fit within existing ABS statistical frameworks for index design and compilation. These requirements are based on the Australian and New Zealand Standard Industrial Classification 2006 (ANZSIC) and the product and industry relationships articulated in the Australian National Accounts Input Output tables.
The development proposal is to initially develop a PPI for Input Output Product Classification (IOPC) 07000030 Natural gas in the gaseous state, using data already collected for other price index compilation combined with data collected from new providers. This PPI will also cover IOPC 07000050 Coal seam gas, as it is not practical to collect prices separately for this product.
The PPI will be an output price index. Output price indexes measure the average change in the price received by producers, preferably at basic prices. Basic prices exclude taxes and subsidies, transport costs and trade margins.
Upon completion of the index development, the PPI will be disseminated in Producer Price Indexes, Australia (ABS cat. no. 6427.0). A historical time-series will be published. The period of the time series will be subject to data availability and quality considerations. The PPI will be published at the Australia level, and it is intended to design the index so that publication of a lower level geographic split reflecting the different pricing dynamics between the east coast and west coast within the industry will be possible. The publication of lower level indexes will occur where ABS disclosure and provider confidentiality conditions are satisfied.
Readers were invited to provide feedback on the proposal published in December 2015. The ABS thanks all the stakeholders who took the opportunity to submit feedback. This paper provides a formal acknowledgment of these submissions, and will address topics raised by stakeholders through the feedback process.
The submissions identified three significant topics. These topics can be broadly categorised as:
- Purpose and use of the index
- Scope and coverage
- Provider burden