Issues paper released for the East Coast Gas Inquiry

by Energy Action | Jul 16, 2015
The Australian Competition and Consumer Commission recently released its issues paper for the East Coast Gas Inquiry. The issues paper sought information and responses from industry participants and other interested parties to assist the Regulator in its inquiry into the east Coast gas market.

The issues paper comprehensively covers the upstream gas sector encompassing exploration, production, processing, supply, transportation and storage and highlights key issues including:

    • - Impacts of LNG export gas on gas flows and the domestic gas industry,
    • - Rising domestic gas prices and changes in non-price terms,
    • - Negotiation processes,
    • - Access to essential infrastructure, including gas processing,
    • - Availability of information,
    • - Pipeline development and access to capacity.

The Australian Competition and Consumer Commission (ACCC) wanted specific examples of market structures, key factors, or behaviour by market participants that may:

    • - affect the incentives or ability of parties to supply gas;
    • - affect the ability or willingness of parties to compete in the provision of a range of services across the gas value chain;
    • - demonstrate whether the outcomes observed in the domestic gas industry are driven by broader changes in the domestic gas industry such as rising production costs or export price linkages, or are indicative of an increase in the market power of domestic gas suppliers; and
    • - demonstrate possible anti-competitive conduct.

Upon releasing the Issues Paper in mid-June, the ACCC Chairman said the ACCC has no preconception that there is illegal behaviour, or that position in the market is being inappropriately exercised to influence market outcomes.

However a number of accusations have been made in submissions to the ACCC. Gas producers have been accused of profiteering and hoarding capacity on pipelines, as industrial users seek more open access to scarce supplies at competitive prices.

As part of the inquiry, gas buyers including Incitec Pivot and Australian Paper, made confidential appearances before the competition watchdog to report on their experiences in commercial negotiations for energy supplies.

Not surprisingly, gas producers said in their submissions buyers needed to appreciate and understand the increase in costs that have driven prices higher, even without the Queensland Liquefied Natural Gas (LNG) plants.

The ACCC says it is aiming to get to the bottom of conflicting claims between gas producers and buyers over the availability of long-term supplies in a market where demand is set to triple in the next two years because of the start-up of LNG export plants in Queensland. The surge in demand, combined with delays in the development of NSW coal seam gas resources, has driven up prices well beyond historical levels of $3 to $4 a gigajoule.

Leave a comment