An ACCC inquiry has begun into the competitiveness of Eastern 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.
Releasing the terms of reference for the inquiry, Small Business Minister for the Federal Government, Bruce Billson said gas market participants have complained that a lack of transparency was hampering efforts to buy gas.
“Our wholesale gas markets are based on confidential bilateral contracts with a comparatively small number of suppliers and infrastructure owners,” Mr Billson said.
“Participants have complained about a lack of transparency in the gas market and the information asymmetry facing those trying to access gas.
“The Australian Government wants to ensure there is adequate competition to allow participants to operate. This ACCC inquiry will establish if Australia’s eastern gas market is operating effectively.”
Mr Billson said Professor Ian Harper’s recent Review of Competition Policy recommended a detailed review of competition in Australian gas markets and a recent Productivity Commission research report found a thorough investigation of market power issues was required before further policy intervention in upstream gas markets.
Industry and Science Minister Ian Macfarlane said “natural gas plays a critical and increasing role in Australia’s economy.
“Potential competition issues in Eastern Australia’s wholesale gas market were flagged in the Australian Government’s Eastern Australian Domestic Gas Market Study, and by the Victorian Gas Market Taskforce.
“The Energy White Paper also announced that the ACCC will investigate the effectiveness of competition in the gas market, particularly upstream.
“I am confident that we have the gas resources to meet domestic demand and gain the economic benefits of exporting gas. Ensuring that our gas markets are competitive is vital to promoting gas resource investment.”
APPEA Acting Chief Executive, Paul Fennelly, is also confident that the inquiry will reveal the market to be working efficiently and has 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 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.”
“The inquiry will also allow the Commission to rigorously test unsubstantiated claims that ‘there is no gas available at any price’.”
EUAA Chief Executive, Phil Barresi, has also welcomed the ACCC’s announcement, stating that he is “pleased with the Government’s commitment to show the way on the impending gas supply crisis by addressing community confidence issues through this inquiry.”
APGA Chief Executive, Cheryl Cartwright, agrees that the review will shed light upon the lack of a supply response to higher prices in 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.