Coalition Senators' Minority Report
The Coalition members of the committee, while
philosophically subscribing to the concept of the desirability of competition
in markets producing the best outcome for consumers, are of the opinion that
the special features of the WA gas market at this stage of its development mean
that requiring the members of the North West Shelf Joint Venture separately
market gas would not necessarily result in the desired outcome of competition
driven price reduction.
In evidence given to the committee the WA domestic gas
market was described as being small and immature. The committee was informed
that there were about 30 purchasers in WA for domestic gas largely supplied by
two producers namely the North West Shelf Joint Venture and Apache for a single
gas pipeline – Dampier to Bunbury.
In their submission to the economics committee the North
West Shelf Joint Venture explained that:
The Western Australian domestic gas market currently operates
primarily as a 'contract' or 'project' market, where gas project investment,
development and production is undertaken to meet specific, and often large and
long-term, contractual obligations with customers (most of whom themselves
require supply security to underpin their downstream investments).[1]
The submission goes on to say that:
In the Incremental Pipeline Gas Joint Venture (IPGJV) 1998
determination, the ACCC stated 'while it is impossible to be prescriptive about
exactly what market features need to develop before separate marketing will
become viable in Western Australia, the greater the number of the following
list of market developments that are introduced, the greater the likelihood that
separate marketing will be viable:
-
a significant increase in the number of customers,
-
entry of new competitive suppliers,
-
additional transportation options,
-
storage,
-
the entry of brokers and aggregators,
-
the creation of a gas-related financial market, and
-
development of significant, short-term and spot markets.'
Comprehensive industry and market analysis undertaken by the
DGJV and the IPGJV in 2005 and 2007 (provided to the ACCC on a confidential
basis) together with other major government and expert studies confirm that the
relevant features of the Western Australian gas market remain essentially
unchanged since 1998. The current Western Australian market fundamentals can be
summarised as:
-
a small number of market participants,
-
concentration of supply and demand,
-
prominence of long term supply and transportation contracts,
-
lack of transportation and storage flexibility / capability,
-
lack of market intermediaries and financial instruments, and
-
no substantial structure or mechanism in the market through
which short-term sales occur.[2]
The Committee was informed that separate marketing has
produced competitive pricing in large markets such as the US and European
market where there are a large number of suppliers, a choice of modes of
transport and a well established gas market. It was noted that the Eastern
Australian gas system has more of the features considered to be desirable
precursors to separate marketing operations than WA.
There was discussion regarding the implications of the ACCC
having withdrawn the existing authorisation for a joint selling arrangement for
the North West Shelf Joint Venture. The Coalition Senators noted that
Freehills, which represented the NWSJV at the ACCC inquiry leading to the
withdrawal of the authorisation (as is said in Chapter 1 of the Chair's report)
had drawn attention to the fact that in 2007 the Federal Government acted to
enhance protection for joint ventures under the Trade Practices Act and
added that joint venture activity, particularly when it is related to
development and operation of large scale infrastructure is pro-competitive.
Given the high dependence of WA industry on stability of
the overall gas supply system the Coalition Senators are of the opinion that
any change to the WA domestic gas marketing system needs very comprehensive
evaluation of all relevant factors before any decisions are made.
Senator Alan Eggleston
Deputy Chair
David
Bushby
Barnaby Joyce
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