The Business Council of Australia (BCA) welcomes the opportunity to comment on the Commonwealth Gas Market Review Consultation Paper.
Key takeaways
A well designed gas reservation scheme for the east coast has potential merit provided it replaces any
redundancy created with the existing three measures under review, and does not impact or overlap in any way with the Western Australia Domestic Gas Policy. Moreover, to work effectively, a gas reserve scheme needs to be supported by efficient and timely administration of approvals for new projects to enable additional supply into the domestic market.
We note that a poorly designed gas reservation scheme for the east coast will work against the objectives of the Future Gas Strategy and this review, by acting as a disincentive for investment in gas resources and
infrastructure in Australia more generally.
Establishing a well designed gas reservation scheme for the east coast will take time and during that period, targeted improvements to the three instruments being reviewed can benefit gas producers and users consistent with the objectives of the Future Gas Strategy and this review.
With respect to the Gas Market Code the following changes have potential merit.
- Remove the price cap in the Code, which currently sends a poor signal to investors about the policy and
regulatory risks associated with investing in Australia. - If the price cap remains, then provide greater clarity and certainty of its terms and conditions particularly
with respect to the durability of an exemption once granted, to better enable long term contracting between producers and users of gas. - Consider Code refinements including the following.
- The introduction of contract outcomes reporting to increase transparency.
- Greater transparency requirements for producers to address issues with information asymmetry in negotiation and contracting between buyers and sellers in the gas market.
- The clarification of acceptable conduct regarding contract duration.
- The removal of civil penalties for noncompliance with the expressions of interest process.
- Ensure that regulatory obligations and disincentivised to underwrite future projects.
- Consider the merits of exempting small producers (less than 2 PJ per year) from all provisions of the Code, which would facilitate investment in distributed renewable gas development with flow on benefits to the hard to abate sectors of the economy.
With respect to the Australian Domestic Gas Security Mechanism the following changes have potential merit.
- Sunset the Mechanism in line with the implementation timetable of a well designed gas reservation scheme for the east coast.
- In the interim, all LNG exporters should be treated equitably under the mechanism by calculating shortfall alleviation to explicitly recognise domestic gas supply contributions from individual participants.
With respect to the Heads of Agreement, sunset the Agreement in line with the implementation timetable of a well designed gas reservation scheme for the east coast.