LNG boom impacting gas market conditions in Australian domestic market
Australian Competition and Consumer Commission (ACCC) agrees with gas users complaints about lack of competition in east coast gas market and says prices may have changed permanently.
Complaints by east coast gas users about a lack of supply offers in recent years are largely true, the competition watchdog has found.
The ACCC has been holding a year-long inquiry into the east coast gas markets of Australia after complaints from gas users about an opaque trading market and lack of competition.
In preliminary observations on Thursday, ACCC chairman Rod Sims said pricing conditions in the east coast gas market may have changed permanently because of the arrival of large liquefied natural gas projects.
“Despite the early expectation of a gas production boom, the east coast market seems to be perhaps one of the few gas markets in the world which is now living under the shadow of supply uncertainty,” he said in a speech.
“These uncertainties are being exacerbated, but not necessarily caused by, the fall in oil prices with its links to international LNG prices.”
He said while the inquiry was less than halfway through, his observations were based on early insights from the review.
The evidence, particularly between 2012 and 2014, showed domestic users often receiving only one true offer, largely on inflexible terms, compared to between three to five offers previously.
A number of gas deals in this period were related party transactions with the LNG projects shoring up supply positions, or other deals between suppliers, he said.
The situation has changed in the past year, with deal terms turning more flexible, after the federal government publicly canvassed the idea of the ACCC inquiry.
The government ordered the inquiry to investigate whether insufficient competition in the wholesale gas market was driving up prices.
In recent months, large suppliers have complained against the regulatory scrutiny.
In August, gas pipeline operator APA Group said it was not happy at all with the amount of commercial information it was being asked to hand over in the review. BlueScope Steel has made similar complaints.
The inquiry is looking into the gas value chain and will make recommendations to the government on where reform is required, how markets can become more efficient and if significant market power and competition concerns exist in the east coast market.
Meanwhile, the ACCC has delayed making a decision on Royal Dutch Shell’s proposed $70 billion takeover of BG Group amid concerns that it could lead to higher gas prices.
https://www.sbs.com.au/news/article/2015/09/17/lng-boom-impacting-gas-market-conditions
