5 June 2015
ACCC vows tough probe of east coast gas market
Competition boss Rod Sims says he plans to use his watchdog powers to investigate confidential gas supply contracts and negotiations in his probe of the east coast gas market, where industrial users claim they are unable to get competitive offers in the face of $70 billion of Queensland LNG export projects.
The Australian Competition & Consumer Commission yesterday launched an issues paper on the investigation of the connected gas markets of Queensland, NSW, Victoria and South Australia, where prices have surged because of demand from the LNG plants.
The ACCC chairman said a host of other inquiries into the market had run into brick walls in the form of confidentiality agreements around gas supply deals and conflicting claims from different sides.
“There’s been a lot of concern in the gas market with the massive introduction of the LNG projects,” he told The Australian.
“Gas users have been saying they can’t get offers of supply and they feel this is evidence of a non-competitive market,”
The inquiry, which started in April, will investigate whether competition laws have been breached and whether markets are operating as they should be.
“The difference between our inquiry and others is that the others have got a certain point where they’ve said look, we just can’t get hold of the underlying data to see what’s going on,” Mr Sims said. “We’ve been asked to use our information-gathering powers to get to the bottom of what is actually going on.”
Gas users have complained that big suppliers have not been prepared to offer long-term contracts and that it has been hard to get competing offers from different suppliers, with available gas being earmarked for the three LNG plants being built on Gladstone’s Curtis Island.
“I suspect this is not about anti-competitive behaviour in terms of a breach of our act,” Mr Sims said. “It’s about understanding whether the market is working as you’d expect a competitive market to work.”
The inquiry will look at the impact of LNG, rising prices, access to pipeline and gas processing infrastructure, available market information and the impact of joint marketing.
The ACCC is expected to be called on this year to rule on the $91bn merger between Royal Dutch Shell and BG Group, with a focus on the impact of the tie-up of BG Group’s Queensland Curtis LNG project and Shell’s 50 per cent-owned Arrow coal-seam gas project, where reserves have not been allocated for development. Mr Sims said the pair had not approached the ACCC so the issue had not been investigated.
“The fact we’re doing the gas study will also obviously inform our merger assessment as well, so we might learn more about gas than we otherwise would have, which will help our analysis,” he said.
“Whether (QCLNG) getting hold of that (Arrow) gas in some way lessens competition, and I don’t have an immediate view there’s a problem, is what we’ll be looking at.”