CoPS/IMPACT Working Paper Number G-250

Title: The Impact of LNG Export Expansion in Queensland, with special emphasis on the effects of increased gas prices

Author: Philip Adams


The large Queensland LNG projects currently under construction will begin production over the next two years. Exploiting previously unused reserves of coal seam gas, the LNG produced will be sold at an international price which far exceeds the current price of natural gas in Eastern Australia. The new exports of LNG will therefore boost Australia's exports and terms of trade, leading to increased real GDP and welfare for the national economy.

But this is only one part of the overall impacts of the new projects. Through competitive pressures, the price premium received for unconventional Queensland gas will lead to increased prices for gas throughout Eastern Australia. This will increase costs of production for energy-intensive industries. For those industries (and regions) which cannot pass on the cost increases, production will fall.

In this paper, using the Victoria University Regional Model (VURM), we report on simulations designed to provide a balanced assessment of the costs and benefits of the new LNG projects. Key findings are:

JEL classification: C68, D58, F43, O40.

Keywords: CGE modelling, Gas production, LNG exports, Australian economy.

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