Gas transmission shake-up coming

THERE will be a major shake-up of how pipelines move gas around the east coast if the Australian Energy Market Commission’s new recommendations to the Council of Australian Governments’ Energy Council are implemented.

Anthony Barich

Released last week, AEMC’s 15 proposals won’t solve the debate raging about subsidies to renewables and their impact on the energy market South Australia’s energy crisis earlier this month, but are more to do with giving users access to gas throughout the east coast.

The recommendations centre around increasing competition so consumers don’t pay more than necessary for a reliable supply of gas.

AEMC’s report attempts to address a number of issues raised by the Australian Competition and Consumer Commission in its April inquiry, which was criticised by legal experts and the pipeline industry for saying there was a monopoly in the pipeline market without coming up with any evidence.

It recommended an implementation group constituting senior industry leaders and officials from several state energy departments be set up to ensure reforms are rapidly progressed.

AEMC says its suggested reform package offers more than $8.7 billion worth of value to the GDP in net present value accruing to businesses and consumers to 2040.

It also seeks to help Australia’s economy maximise the value of the investment in gas exploration and infrastructure in Queensland over the past five years for the three LNG megaprojects that some argue have sucked much-needed gas for domestic needs and caused gas prices to rise.

Manufacturers have been up in arms, so AEMC suggests concentrating wholesale gas trading at two hubs – a Southern Hub in Victoria and a Northern Hub at the existing Wallumbilla hub in southeast Queensland.

These measures are aimed at allowing for greater price transparency helping gas users to more easily buy and sell the gas.

“More efficient gas trading markets will provide more options for buyers and sellers of gas to enter into supply agreements, outside of the traditional long term bilateral contracts,” AEMC said.

“These markets will also be the foundation for the development of more sophisticated risk management tools to help gas market participants manage their gas portfolios in an increasingly dynamic, volatile domestic gas market.

“Greater alignment of the rules governing how gas is traded and moved across the east coast – from South Australia to Queensland – will make it easier for businesses to use these markets, lowering barriers to access and increasing competition.

“Introducing market-based pricing mechanisms into the sale of short-term pipeline capacity, and improving the tools available to trade capacity will make it easier to access gas that is available from anywhere on the east coast and transport it to where it is valued most highly.”

Australian Pipelines and Gas Association CEO Cheryl Cartwright told Energy News this morning that the pipeline industry was keen to work with the AEMC to increase competition in the gas transmission industry.

The AGPA is looking at setting up capacity trading platforms, which is something AEMC wants.

Gas buyers have long complained about not wanting intermittent capacity, which is what the pipelines have left over having sold all their firm capacity.

These companies have bought it on contract long-term but don’t use it all the time making it look like the pipelines aren’t being used, so a trading platform will encourage those companies that own that capacity to put it up and make it available, Cartwright said.

“There will be more liquidity and more gas available when there is more gas supply. So in the meantime, to make the gas market more efficient, the AEMC wants these changes and we’re working with them on capacity trading options, platforms and other transparency issues,” she said.

“Sometimes there is confusion that improving the gas market operation will improve supply, but the only way to do that is to actually increase supply, like lifting CSG moratoriums, among all sorts of options.

“It’s not a solution to supply but it’s a good and worthwhile outcome to help make the market more efficient.”

She said it was not an underlying issue to the energy shortage issue, but a “distraction”.

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