An alliance representing natural gas buyers claims the competition watchdog's approval of joint selling by the North West Shelf gas producers will add $2 billion to annual gas bills.
An alliance representing natural gas buyers claims the competition watchdog's approval of joint selling by the North West Shelf gas producers will add $2 billion to annual gas bills.
The Australian Competition and Consumer Commission today granted conditional authorisation to the joint venture partners in the North West Shelf Gas Project to jointly market and sell their individual domestic gas entitlements for supply in WA.
The partners, BHP Billiton Petroleum, BP Developments Australia, Chevron Australia, Japan Australia LNG (MIMI), Shell Development Australia and Woodside Energy have previously had authorisation from the ACCC for joint marketing.
"Continuing and increased supply from the North West Shelf will be crucial as the WA gas market is forecast to continue to experience high demand levels but has limited new supply prospects in the next two or three years," ACCC chairman Graeme Samuel said.
But DomGas Alliance, which represents Alcoa of Australia, Alinta, Burrup Fertilisers, Dampier Bunbury Pipeline, ERM Power/NewGen Power, Fortescue Metals Group, Horizon Power, Newmont Australia, Synergy, Verve Energy and Murphy Oil, believes the agreement is bad news for consumers.
DomGas Alliance executive officer Gavin Goh said major gas producers have been combining together to demand 300 per cent price increases from WA consumers.
"At these prices, Western Australia would be forced to spend an extra $2 billion a year on gas," Mr Goh said.
DomGas claims gas producers are withholding supply from the very tight domestic gas market by selling jointly and by warehousing gas reserves under offshore retention leases.
But the alliance's claim was rubbished by the Australian Petroleum Production and Exploration Association, which represents gas producers.
"Their $2 billion claim might get them a headline but it hasn't stood up to independent analysis," APPEA's WA director Tom Baddeley told WA Business News.
He said the ACCC had considered a wide range of views, including those of the alliance, before deciding that joint marketing was appropriate.
"These are conclusions reached, not by the industry, not by governments, but Australia's independent competition watchdog," he said.
In a statement the ACCC said, "A number of interested parties provided submissions expressing concern about future natural gas supply certainty in WA."
"Some considered that separate marketing is commercially viable in WA, which would encourage greater competition and lower prices," the statement said.
"The ACCC is not currently satisfied that the WA market is sufficiently mature or liquid to make separate marketing commercially viable for the North West Shelf partners," said Mr Samuel.
"The ACCC is concerned that if the North West Shelf partners were unable to jointly market and attempted to separately market, they would face additional commercial risks and costs such that the level of supply would likely be less than under joint marketing.
"Given the high level of demand in WA, the ACCC considers that the likely supply of higher domestic gas volumes under the proposed joint marketing arrangements is a significant public benefit," said Mr Samuel.
The ACCC proposes to grant authorisation until 31 December 2015.
Full statement from ACCC below:
The Australian Competition and Consumer Commission proposes to grant conditional authorisation to the joint venture partners in the North West Shelf Gas Project to jointly market and sell their individual domestic gas entitlements for supply in Western Australia.
Since 1984, when the North West Shelf began production, it has supplied the majority of WA's natural gas.
All natural gas supplied in WA by the North West Shelf partners has been jointly marketed. The partners have previously had authorisation from the ACCC for joint marketing.
"Continuing and increased supply from the North West Shelf will be crucial as the WA gas market is forecast to continue to experience high demand levels but has limited new supply prospects in the next two or three years," ACCC chairman Graeme Samuel said today.
A number of interested parties provided submissions expressing concern about future natural gas supply certainty in WA. Some considered that separate marketing is commercially viable in WA, which would encourage greater competition and lower prices.
"The ACCC is not currently satisfied that the WA market is sufficiently mature or liquid to make separate marketing commercially viable for the North West Shelf partners.
"The ACCC is concerned that if the North West Shelf partners were unable to jointly market and attempted to separately market, they would face additional commercial risks and costs such that the level of supply would likely be less than under joint marketing.
"Given the high level of demand in WA, the ACCC considers that the likely supply of higher domestic gas volumes under the proposed joint marketing arrangements is a significant public benefit."
The ACCC notes the concerns of WA gas purchasers about rapid price increases over the past few years. The ACCC does not consider that this increase is because of the joint marketing.
Rather, it appears that the growth in demand for energy from the resources sector coupled with limited increases in supply, the LNG component of current and prospective WA gas projects and the higher costs of exploration and development have driven prices higher.
To address concerns about the potential for commercially sensitive customer information to be shared between competing gas projects in WA, the ACCC proposes to impose conditions to ensure adherence to robust ring fencing arrangements.
The ACCC proposes to grant authorisation until 31 December 2015, as there exists some potential for the WA gas market to develop by this time, in particular with the introduction of new sources of supply.
"The North West Shelf authorisation would then conclude at the same time as the Gorgon Gas Project authorisation. If both joint ventures seek re-authorisation at the end of 2015, it will provide the ACCC with an opportunity to assess the development of the WA natural gas market," Mr Samuel said.
The ACCC invites submissions on its draft decision, prior to it making a final decision in the coming months. Information about making a submission and the ACCC's draft determination will be available from the ACCC website, www.accc.gov.au/AuthorisationsRegister.
The North West Shelf Project partners are: BHP Billiton Petroleum, BP Developments Australia, Chevron Australia, Japan Australia LNG (MIMI), Shell Development Australia and Woodside Energy.
In November 2009, the ACCC granted authorisation to the Gorgon Gas Project joint venture participants (Chevron Australia Pty Ltd, Chevron (TAPL) Pty Ltd, Mobil Australia Resources Company Pty Ltd and Shell Development (Australia) Pty Ltd) to jointly market and sell their natural gas entitlements from the Gorgon project for supply in WA until 31 December 2015.
