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ACCC cuts through the fog on gas market

The ACCC's inquiry has confirmed that gas users are right to be worried about the Eastern Australian gas market, and has laid out sensible directions for reform, Australian Industry Group Chief Executive Innes Willox said today.

"Gas plays a critical role as a feedstock and an efficient source of heat and power to industry. Gas users have been raising the alarm for several years about the impact of massive change in the market on industry and the consequences for investment and jobs. Today the ACCC has found that the gas market is opaque, that there are significant risks to supply, and that the competitive dynamics south of Queensland are deteriorating considerably. They've confirmed that gas users have faced an unprecedented change in their ability to obtain gas. The story that the ACCC tells is one that should galvanise attention and action from all levels of government.

"Local supply of gas is being buffeted as gas exports take off; international oil prices crater investment; and regulatory barriers and community concern further choke resource exploration and development. The headline that identified reserves are adequate to meet projected demand is important and reassuring. But there are many hurdles in the way of those reserves being brought to market in full and on time. Replacing blanket bans with smart, effective regulation of onshore gas development will help over the medium term and should be a priority for the states and territories.

"The ACCC's decision to further investigate joint marketing of gas from the Gippsland Basin Joint Venture, in light of competitive changes that increase the market power of the arrangement, may turn out to be the biggest step announced today. Maximising effective competition in the market is crucial, whether it involves bringing on new suppliers or changing the dynamics between existing suppliers.

"Many of the other recommendations will take considerable time and effort to work. The development of new regulatory tests for pipelines will no doubt be fraught and lengthy, though competition and investment in the pipeline sector is vital to both suppliers and users of gas. The proposed major increase in transparency around resources, reserves, netback prices and contract prices will help cut through the fog that currently hangs over the market, but their impact will be longer term.

"There are no easy fixes or immediate answers to the serious challenges facing Australian gas users. But the ACCC is clearly listening. The Commonwealth, States and Territories should do likewise, pursue the agenda laid out today, and build on it," Mr Willox said.

Media Enquiries: Tony Melville - 0419 190 347