Ann: BBP Market Update , page-23

an article regard to high gas price set by north west shelf in WA..looks like bbp is not the only one.

Just what is happening with the North-West Shelf? CHALPAT SONTI
October 8, 2009
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It's been an investigation shrouded in secrecy from the start. And it appears the end is not in sight.

As some of the resources industry's largest players slug it out, WA gas consumers wonder whether they will soon pay more or less for a product the state appears to have in abundance.


In August last year, the Australian Competition and Consumer Commission announced a probe into the nation's largest resources project, the North-West Shelf.

The watchdog was looking into whether allowing the six joint venture participants in the Shelf to band together to sell gas under one banner - so-called "joint marketing" - should continue.


A few months earlier it had revoked its previous authorisation of the scheme - at the behest of the venture, which said its joint marketing no longer needed authorisation - thus ending a legal protection which started up in the project's earliest days in the 1970s.


The ACCC's probe was sparked by complaints from consumers - including some of WA's largest companies - that they were paying more for gas than they should because of joint marketing.


That probe also resulted in an inconclusive end to a separate federal inquiry into the arrangements, with the Senate economics committee claiming it could not make any recommendations prior to the investigation being finalised.
In the meantime, the Shelf participants continue to sell gas jointly without any authorisation provided by the ACCC. Its marketing agency negotiates with customers, but must seek approval from all six joint venturers before agreeing to contract terms or price.


But with the recent decision by the ACCC to allow the participants in the giant Gorgon gas project to band together to sell their domestic gas under one banner, many in the industry are betting it is merely a matter of time before the Shelf asks the ACCC for permission to also do so again.


As that speculation grows - with the investigation still to be resolved - those at the centre of the debate remain tight-lipped.


ACCC chairman Graeme Samuel would not discuss the investigation, or whether the Shelf joint venture had applied for an authorisation, when contacted by WAtoday.com.au.


"There's been nothing made public about any of that so that's not a matter I could comment upon," he said.


A spokeswoman for the North-West Shelf said the venture was leaving its options open.


"The North-West Shelf project participants have always reserved the right to apply for a fresh ACCC authorisation if and when considered appropriate and are committed to selling gas to new and existing customers in WA," she said.


Shell and Chevron are participants in both Gorgon and the Shelf. While Chevron will market Gorgon gas, Woodside fulfils that role for the Shelf, in which giants BHP Billiton, BP and Japan Australia LNG also have stakes.


While they sell gas to foreign customers separately, they argued that WA's domestic gas market was too "lumpy" - small numbers of large buyers and sellers - and "immature" to allow each of the venture participants to sell domestic gas separately, and forcing them to do so would make the local arm of the projects unviable.


But those calling for an end to joint marketing - which they say leads to higher prices for domestic consumers in WA - have called the ventures "cartels" in which each participant could easily stand on their own feet.


Among the opponents is the DomGas Alliance, which represents most of the major gas users in WA, including monopoly residential supplier Alinta, and resources giants Alcoa and Fortescue Metals.


It regards the Gorgon and North-West Shelf ventures as responsible for WA gas prices being as much as three to four times higher than those in the Eastern States, and points out that the Gorgon authorisation would only apply to about 5 per cent of the total gas produced by the projects, negating the viability argument.


Alliance chairman Tony Petersen said the ACCC had been sitting on the Shelf issue for more than two years "with no outcome for consumers".


"Yet when (Gorgon participants) Shell, Chevron and ExxonMobil applied to sell jointly, consumers were given just 10 working days to respond," he said.


"It took just five weeks for the ACCC to grant them interim authorisation. There appears to be a real divide between the ACCC's public stance on competition and their actions over many years in protecting the world's biggest oil and gas companies.


"A different set of rules clearly apply if you are Shell, Chevron or ExxonMobil."


WA had "one of the most anti-competitive gas markets in Australia", Mr Petersen said.


"Major producers enjoy immense power ... they have been able to do so because of the actions of the ACCC."


Another submitter to the federal inquiry was competition expert Frank Zumbo, an associate professor of business law at the University of NSW.


An opponent of joint marketing, he told WAtoday.com.au that the North-West Shelf should "urgently" apply for an authorisation, as this would give WA gas users greater transparency as to the joint venture's gas marketing activities in the state.


"There are serious questions about whether or not the North-West Shelf's joint marketing arrangements are in breach of the Trade Practices Act," Mr Zumbo said.


"These can finally be put to rest if it applied for an authorisation."


The ACCC also needed to finalise its investigation to put to rest legal uncertainty, he said.


"We need greater transparency and accountability in the WA upstream gas market currently dominated by the North-West Shelf. The sooner the upstream sector is opened up to competition, the sooner WA gas users will start seeing falls in domestic gas prices."