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Oz gas players slammed in ACCC submission

ADELAIDE Brighton Cement has slammed gas players Santos, BG, Origin, Beach, Drillsearch and Senex...

Blair Price

It believed that LNG project-linked gas producers were not concerned enough about domestic gas needs.

“For example: BG has demonstrated little interest in supplying domestic gas customers; Santos is rationing gas supply contracts to large South Australian customers to satisfy SA government; and Origin gas offers to ABCL have been very uncompetitive relative to their peers,” the cement maker said.

Other players were also mentioned on the topic of whether the LNG projects created opportunities for gas suppliers to exercise market power in the East Coast market.

“In our experience: Santos can exert market power for gas supplies to customers who are captive to the Moomba to Adelaide Pipeline; Beach sell their gas to their peers, not making any real offers to large customers; Origin is not forthcoming in providing contract offers and/or pricing is not competitive; and Drillsearch and Senex are captive to [the] Cooper Basin Production facility and are forced to sell their raw gas to Santos.”

ABCL said the only alternatives were high-risk projects such as those offered by Strike Energy and Marathon.

The cement maker further said that the Gippsland Basin joint venture (50:50 ExxonMobil and BHP Billiton) was the “only party insisting” on oil linked gas pricing.

“Oil linked pricing has been uncompetitive relative to fixed price offers,” ABCL said.

“Together, the Queensland LNG projects comprising QCLNG, GLNG and APLNG with BHP/Exxon Mobil control approximately 90% of eastern states gas reserves.

“And you have a market where gas suppliers have substantial market power and a commercial incentive to place priority on supply to export customers. This is translating to restrictions in the availability and flexibility of gas supply for domestic users and deteriorating price and non price terms.”

The cement maker’s submission has already triggered various responses.

According to News Media, Origin disagreed with the “assertion that we have not been forthcoming in providing gas offers to customers and at competitive market prices” and said it sold more domestic gas in the recent financial year than in the previous year.

BG subsidiary QGC reportedly said it had a strong history of supplying the domgas market and accounted for about 20% of Queensland’s demand.

In their earlier submissions to the ACCC, Santos said it made more than 10 domgas sales agreements in the past year while BHP said the industry was now linked to world energy markets and “it is inevitable that pricing structures will be influenced by that linkage”

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