PERTH (miningweekly.com) – Diversified miner BHP Billiton has warned that a gas reservation policy in the East Coast of Australia could be detrimental to market dynamics.
In a submission to the Australian Competition and Consumer Commission (ACCC), BHP acknowledged that there were significant changes under way in the East Coast domestic gas market, driven by the development of export gas projects and a resultant three-fold increase in industry demand.
“While BHP Billiton understands concerns have been raised regarding the impact on domestic gas prices, we believe the market is responding positively, and as might be expected, to such a large demand increase, with new domestic supply contracts being executed by the Gippsland Basin joint venture (GBJV) and other suppliers,” the miner said in its submission to the ACCC.
BHP holds a 50% interest in the GBJV, which has supplied the East Coast gas market with natural gas for more than 45 years.
In its submission to the ACCC, the miner said that government action should be directed at the policy level to facilitate an efficient energy market, adding that any further intervention should only be in response to demonstrated market failure and informed by cost-benefit analysis.
“Government moratoria and other unnecessary restrictions on supply lead to distorted market dynamics and reduced incentives for investment. BHP continues to oppose gas reservation for these reasons.”
The miner also noted that though the market was responding to relevant dynamics there was still a long way to go before it began to approach the liquidity seen in other gas markets such as the US and UK.
“BHP supports initiatives to increase liquidity, transparency and market efficiency such as market trading hubs which will assist this development.”
The ACCC in June called for submissions into its East Coast gas inquiry, which would consider the competitiveness of wholesale gas prices and the structure of the upstream, processing, transportation, storage and marketing segments of the gas industry.
The inquiry started in April this year, and was due to report to the government by April 2016.