Domestic gas prices in Western Australia could quadruple over the next few years, says a report by broking house Argonaut Securities.
Report author analyst Ian Christie says the days of $ 2 gas are gone and a short-term supply gap will spike prices at between $ 7 and $ 10 per gigajoule in the next two to three years until new supply comes on line early next decade.

"Western Australia gas prices have been out of line internationally for some time, and a sharp realignment was always on the cards," Mr Christie said. "LNG producers, for example, who are enjoying rapidly growing export demand and negotiating prices above $ 10 per gigajoule, will be seeking competitive prices for gas sold domestically."
He said the costs of finding, developing and producing gas were picking up sharply.
"... gas is more distant, deeper, dirtier and drier (and) will ensure a higher floor for prices even when new supply comes on stream."

Mr Christie said gas producers that can deliver uncontracted gas -- Santos, Tap Oil and possibly ARC Energy - were in a strong position to negotiate terms. Large commercial consumers that have not yet tied down their energy requirements, such as new mines, could lose out, he warned.
Western Australia's mining, minerals processing and electricity generating sectors use 95 % of the domestic gas produced, while households only use 5 %. It was no surprise that as the fastest-growing state in Australia over the past five years, Western Australia energy demand has surged, Mr Christie said.

Source: AAP