Gas industry welcomes ACCC review of eastern and southern gas markets

ACCC Chairman Rod Sims.

ACCC Chairman Rod Sims.

The Australian Competition and Consumer Commission (ACCC) is set to commence a 12-month public inquiry into the competitiveness of eastern and southern Australia’s upstream natural gas market.

The inquiry will consider wholesale gas prices in the context of eastern Australia’s gas production, processing, transportation and storage infrastructure.

The Australian Petroleum Production & Exploration Association (APPEA) is confident the ACCC inquiry will demonstrate that the eastern Australian gas market is working.

APPEA Acting Chief Executive Paul Fennelly said: “The industry will participate constructively and is keen to demonstrate there is adequate competition to allow the market to operate effectively.

“Importantly, the inquiry also provides an opportunity to focus – as the Productivity Commission did in its recent research report Examining Barriers to More Efficient Gas Markets (download it here) – on removing the regulatory handbrake that is effectively blocking the industry’s development in NSW and Victoria.

“This would not only allow the market to work more efficiently and effectively, it would also bring on more gas supply and put downward pressure on prices.”

Mr Fennelly said the inquiry will also allow the Commission to rigorously test unsubstantiated claims that “there is no gas available at any price”.

Similarly, Australian Pipelines and Gas Association (APGA) welcomed the ACCC review of gas markets, saying it would highlight the work already undertaken by the gas transmission industry to improve market operations, and might answer some of the questions about the lack of a supply response to higher prices in the domestic market.

APGA Chief Executive Cheryl Cartwright said: “The gas market has an effective access regime for gas transportation, with the National Gas Law invoking the prospect of regulation to market participants, thus helping to ensure competition remains strong and improving commercial outcomes.”

“The pipeline industry has demonstrated innovation in response to a competitive environment, with investment in infrastructure and services,” she added.

Since 2010, APGA said more than $850 million has been spent expanding existing infrastructure, helping to establish an efficient pipeline network across eastern Australia’s gas markets and promoting basin-on-basin competition.

“If there is a gas shortage in the market or there are higher prices, then the market should respond,” Ms Cartwright said. “It’s economics 101.”

While APGA is very enthusiastic about the expanding gas export market, particularly in Queensland with the development of three major LNG export facilities at Gladstone, the association is concerned about the gas supply to the domestic market.

“We are pleased the ACCC has been asked to look at competitiveness in the market and we hope that this is a first step to overcoming any barriers to development of Australia’s vast gas reserves,” Ms Cartwright said.

The inquiry is due to report to the government by April 2016.

Enter your details to subscribe to the free fortnightly Gas Today e-newsletter

Thank you for signing up for the Gas Today Online Update.