The head of Australia's consumer watchdog has slammed the gas industry, accusing it of misleading governments into approving massive gas export projects that have led to soaring power prices, killing off companies and jobs.

Key points: ACCC boss Rod Sims says consumers paid the price when gas companies convinced governments of the need for massive export projects

ACCC boss Rod Sims says consumers paid the price when gas companies convinced governments of the need for massive export projects Some experts now say the economic risks of opening up Australia's gas supplies were grossly underestimated

Some experts now say the economic risks of opening up Australia's gas supplies were grossly underestimated Despite being the biggest exporter of gas in the world, Australia is looking to import large quantities of gas to cope with a looming domestic shortfall

"A lot of the things that Australian governments, politicians, were told when those projects went ahead, turned out not to be true," Australian Competition and Consumer Commission (ACCC) chairman Rod Sims told ABC News in an exclusive interview.

"So I think the gas industry as a whole certainly has to carry a lot of blame for the mess. And it is a mess that we are in; the companies that are closing down and [then] the trouble this is causing for Australian manufacturing and Australian jobs."

"The gas companies assured governments that the local market would be fine, that prices wouldn't go up. And that turned out not to be the case."

He said the Federal Government should be "a bit sceptical" about what companies said.

"Often self-interest dominates what companies tell governments," Mr Sims said.

But the gas industry lobby group APPEA categorically rejected the ACCC chairman's criticisms.

It told ABC News the Queensland coal seam gas fields developed as part of the export program had led to a net increase in domestic supply.

"The ACCC itself put this surplus at 138 petajoules or over a quarter of existing domestic demand on the east coast," Andrew McConville, the chief executive of the Australian Petroleum Production and Exploration Association (APPEA), said in a statement.

APPEA added that moratoriums on new gas fields in New South Wales and Victoria were "key culprits" in any supply shortage.

Australia is the world's biggest gas exporter

Australia has become the biggest exporter of gas in the world.

The gas industry forecast a bonanza in export income and significant economic benefits when state and federal governments considered whether to approve three giant export terminals off the coast of Gladstone more than a decade ago.

But some experts now consider that the economic risks of opening up Australia's gas supplies were grossly underestimated.

Gas prices have tripled since the exports began, despite a boom in gas extraction from the opening up of coal seam gas fields, with the pain being felt by consumers and businesses.

The price shock has forced the closure of some major manufacturing and chemical plants and undermined the profitability and viability of other gas users.

Electricity prices — for households and businesses — have also been driven up by higher gas prices, because gas-fired power stations typically supply the electricity market during times of peak demand.

Mark Samter, a veteran gas industry analyst, agreed with the ACCC that the approval of the three giant gas export terminals was poor policy.

"Should all three of these Queensland export projects happened? I said in foresight, no, but in retrospect, categorically no."

"That was all of the [gas] producers' fault. They probably overstated reserves and were just gung-ho to get these things happening."

"The fight on price was lost 11 years ago when these projects were all allowed to [go ahead] simultaneously."

"It was 40 years of east coast domestic demand that was sanctioned to be exported over 20 years through those export terminals.

"Was that right? Almost certainly not. But we are where we are."

Australia remains the world's biggest gas exporter, but still has to import gas to meet domestic demand. ( Flickr Creative Commons )

Bringing back affordable gas is 'tricky'

Asked about whether a gas reservation policy should be put in place to retain affordable gas for the domestic market, Mr Sims said: "It's a really tricky problem to solve".

He said LNG projects do sell some gas domestically, but "they have got contracts in place internationally and you have to be really careful if you upset those".

"There is just no easy answer to this," Mr Sims said.

"The problem was those three projects went ahead and there wasn't enough gas.

"In a sense, the horse has bolted. Putting the horse back in the stable is going to be very difficult."

The gas industry also disputes the competition watchdog's view that the gas industry is charging Australian users too much for gas and higher prices than it charges customers overseas.

"[An International Gas Union survey found that] in fact Australia is a midfield player in world gas prices league," APPEA boss Mr McConville said.

"Our average domestic prices are amongst the lowest in Asia — lower than gas-importing economies such as Japan, Korea and China, and lower than in our gas-exporting competitors like Indonesia and Malaysia."

The ACCC calculates monthly export-parity or "netback" prices that it says a gas supplier can expect to receive minus the costs of liquifying the gas and shipping it overseas.

That price is about 30 to 40 per cent below current Australian prices.

"It's extremely concerning that the prices that Australian producers can get when they sell gas internationally is often a lot less than what they can get when they sell it domestically," Mr Sims said.

But Mr Samter, who is regarded as fiercely independent, backed Australian gas companies in disputing this.

"It's not comparing apples with apples," Mr Samter said.

Nearly all the gas from the Australian east coast was supplied on long-term contracts, he said, with benchmark gas contract prices in Japan a little more expensive than contract prices in Australia of $9 to $10.

"The contract price at the moment … delivered to let's say Tokyo for a Japanese buyer is Aussie $11 to $12 a gigajoule, so actually Australian buyers are getting to buy their gas cheaper than international buyers are," Mr Samter said.

But daily or spot prices have collapsed to historic lows, equivalent to about $4.

Australia still looking to import gas

Despite being the biggest exporter of gas in the world, Australia is looking to import large quantities of gas to cope with a looming domestic shortfall.

A consortium involving billionaire mining magnate Andrew Forrest and Japanese investors has approval to build a gas import terminal at Port Kembla which could supply 75 per cent of NSW demand.

The consortium, known as Australian Industrial Energy or AIE, is billing it as an opportunity for gas users and big energy companies to take advantage of cheap international prices by importing gas from world markets, or to lock in contracts for security of supply.

Though a country awash with gas being forced to import might seem bizarre, Mr Samter said it was "absolutely necessary".

"To me, there is a 99 per cent certainty you need that volume in the system," he said.

"And if I'm wrong — something that costs $250 million and is being built with private money, where is the risk in having this as an insurance policy?

"The only risk is that some rich people lose $250 million."