Australia’s gas market is experiencing structural change in terms of domestic production, consumption and trade. These changes are being driven by factors including expansion of liquefied natural gas (LNG) export capacity, growth of the east coast coal seam gas (CSG) industry and the expected increase in the use of gas as a low-carbon fuel. The development of large CSG-LNG reserves in Queensland is likely to involve significant expansion in production capacity. Australia’s eastern gas supply market is connected by a series of gas transmission pipelines, which vary in terms of both capacity and utilisation. Some domestic gas transmission pipelines are often operating near capacity. However, data indicates there are periods throughout the year when some eastern Australian pipelines have significant volumes of unutilised capacity. The unused capacity on these pipelines is predominantly contracted to either gas retailers or industrial consumers. These pipelines are often ‘contractually congested’ – that is, market participants are unable to gain direct access to unused capacity on a pipeline because all of a pipeline’s capacity is contracted. There are significant upfront costs involved in building new pipeline capacity, and this may represent a barrier to entry for potential new market participants. Some industry participants have also suggested that it may also be complex and expensive for new entrants to access existing unutilised (although potentially contracted) capacity. This may be due to (what are perceived by some to be) unclear or unwieldy mechanisms for trading gas transmission pipeline capacity. In light of the expected demands on Australia’s gas pipeline infrastructure, increasing the capacity utilisation of existing domestic gas transmission pipelines may provide an avenue to more efficiently allocate gas in the market and could also facilitate additional gas being delivered to the market. In recognition of these issues, the Standing Council on Energy and Resources (SCER) has agreed that governments should be focussed on ensuring supply can respond flexibly to market conditions; and promoting market development. On 31 May 2013 SCER announced the release by officials of a Consultation Regulation Impact Statement (RIS) that examines the case for improving the trade in gas transmission pipeline capacity in the eastern Australian gas market. The RIS explores a range of policy options that could facilitate increased trade in pipeline capacity, which may improve the efficiency of use of gas pipeline infrastructure and complement the operation of the Gas Trading Exchange. A Consultation RIS was prepared by SCER and assessed as adequate by the Office of Best Practice Regulation.
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