04/06/2009 - 00:00

Gorgon seeks approval on joint selling

04/06/2009 - 00:00

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DOMESTIC energy users pursuing greater access to the North West's existing gas supplies have a new fight on their hands, with the partners of the $50 billion Gorgon project seeking urgent joint-selling authorisation from the federal government's competiti

Gorgon seeks approval on joint selling

DOMESTIC energy users pursuing greater access to the North West's existing gas supplies have a new fight on their hands, with the partners of the $50 billion Gorgon project seeking urgent joint-selling authorisation from the federal government's competition watchdog.

In a 60-page submission to the Australian Competition and Consumer Commission, the Gorgon partners - multinational giants ExxonMobil, Shell and Chevron - said they required urgent authorisation on an interim basis to jointly assess demand for gas in the domestic market as part of their final investment decision process.

The locally based users' umbrella organisation DomGas Alliance has pinpointed joint selling by the state's major supplier, the six-partner North West Shelf consortium, as a key obstacle to creating a more competitive market for energy in Western Australia.

The NWS partners have previously been allowed to sell jointly by the ACCC but that authorisation was revoked at the participants' request a year ago and it is understood the watchdog has since been conducting an inquiry into the situation.

Under its original state agreement, the Gorgon consortium agreed to reserve 2,000 petajoules of gas for domestic use and produce a plan by 2012 that would supply at least 300 terajoules per day to the local users.

The deadline for submitting a domestic gas proposal has been extended by three years to the end of 2015.

Furthermore, the Gorgon participants expect that domestic gas supplies will take up to six years to reach the state agreement target of 300Tj/day, initially starting at 150Tj/day in 2015.

"The participants are concerned about any potential inability to discharge those (state agreement) obligations due to perceived regulatory risk," the Gorgon ACCC submission stated.

In their submission the Gorgon participants argue that the WA market is immature, constrained by a small number of big users, a lack of storage and absence of spot market.

They add they will be providing additional competition on the supply sid,e which is currently dominated by the North West Shelf partnership and Apache Energy.

However, two of the Gorgon partners - Shell and Chevron - are also part of the six-member NWS consortium, which is currently selling jointly without ACCC authorisation.

DomGas Alliance chairman Stuart Hohnen said he was surprised at the Gorgon move.

"Why if the North West Shelf doesn't need one [an authorisation] does Gorgon need one?" Mr Hohnen said. "For the Gorgon partners to seek authorisation, it is inconsistent."

Mr Hohnen also dismissed the Gorgon call for joint selling to help it secure project funding.

"Compared to the scale of the LNG investment, domgas funding is trivial," he said.

Mr Hohnen rejected market immaturity as an excuse, claiming a lack of competition among suppliers was a key restraint on local users who had increased demand in recent years.

 

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