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ACCC proposes joint gas marketing in Northern Territory

2nd March 2018

By: Megan van Wyngaardt

Creamer Media Contributing Editor Online

     

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JOHANNESBURG (miningweekly.com) - The Australian Competition and Consumer Commission (ACCC) has released a draft determination proposing to authorise joint gas marketing arrangements between joint venture partners ASX-listed Central Petroleum and Macquarie Mereenie for their Mereenie oil- and gasfield, located in the Amadeus basin in the Northern Territory (NT).

It has further authorised Chevron, INPEX, Shell and ASX-listed Woodside to coordinate maintenance activities at their liquefied natural gas (LNG) facilities in Western Australia and Northern Territory, as the four LNG producers were competing for a limited pool of skilled contractors and specialised equipment to conduct scheduled maintenance.

On the Mereenie deal, the ACCC has granted interim authorisation to allow the development of Mereenie gas as soon as possible. The parties are now allowed to start negotiating joint supply agreements with customers pending the ACCC's final determination.

During a period of joint marketing, Central and Macquarie intend to develop new reserves at Mereenie, estimated at between 110 PJ and 185 PJ, by drilling two new wells at the field.

Central and Macquarie intend to make an additional 15 PJ available for supply into the Northern Gas Pipeline. The companies applied for authorisation through the ACCC because, without it, the joint marketing arrangement would likely breach competition laws.

"The ACCC's preliminary view is that joint marketing is likely to encourage investment to increase gas production at Mereenie. Bringing forward new gas supply benefits the public, particularly once the Northern Gas Pipeline links the Northern Territory to east coast gas markets for the first time later this year," ACCC chairperson Rod Sims said.

"Supply of affordable gas available for east coast customers is tight, particularly in the southern parts of Australia which is putting significant pressure on consumers and businesses. We were very mindful of this in granting interim authorisation," he added.

Customers in the Northern Territory-Mount Isa region appear to have the option of alternative sources of supply, such as Power and Water Corporation from the Blacktip Field in the Northern Territory, and suppliers from the Cooper basin and potentially the Galilee basin.

"These alternatives are likely to constrain Central and Macquarie if they were to attempt to offer their gas at higher prices or on less flexible terms," Sims said.

The ACCC proposes to grant authorisation for the parties to engage in joint marketing for three years. Any agreements entered into during that period must end no later than December 31, 2028.

The ACCC invites submissions from interested parties on the draft determination before it issues its final determination.

On the coordinated maintenance deal, Sims pointed out that LNG producers could now schedule maintenance together without risking breaching competition laws, reducing concurrent work at their facilities. "This will improve efficiency and increase LNG production."

The producers' facilities convert natural gas into LNG for export. Some of the facilities also supply, or have the ability to supply, natural gas to wholesale domestic markets. When the LNG facilities are off line for maintenance, some gas may be directed to these wholesale markets.

"If producers become aware of each other's LNG facility shutdowns as part of this agreement, this information might give them an advantage in gas trading markets," Sims said.

To tackle this, the ACCC has imposed a condition of authorisation requiring the LNG producers to publicly disclose maintenance schedule information that they share with each other. A similar condition applied under an authorisation granted to LNG producers in Queensland in 2016.

"Information is a crucial component for creating efficient, well-functioning markets. Market-sensitive information disclosed to competitors as part of this process should be available to all participants," Sims noted.

Authorisation has been granted for five years, rather than the ten-year period sought by the LNG producers.

"With the evolving nature of the gas markets, there is significant uncertainty about the impact of the proposed conduct on related markets. If the parties wish to seek re-authorisation in 2023, the ACCC will test whether the expected benefits and detriments have arisen and to assess the effectiveness of the condition," Sims said.

The Gorgon, Wheatstone, North West Shelf and Pluto LNG facilities in Western Australia are operational.

The Prelude LNG facility off the Western Australian coast and the Ichthys LNG processing facility are expected to become operational this year.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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