September 18, 2009
A decision by the consumer watchdog to allow the Gorgon project partners to jointly market the gas it sells them has led to warnings of higher prices for consumers.
The Australian Competition and Consumer Commission yesterday agreed to allow the Chevron-led consortium behind the $43 billion project to band together to sell gas to domestic consumers.
It means Chevron can sell gas to locals on behalf of the joint venture, denying customers a chance to get a better deal with one of the other partners through competitive tension.
But the Gorgon partners argued for the arrangements, similar to those existing for the North-West Shelf, saying they were needed to ensure domestic supply, which will probably start from 2015.
"Joint marketing is likely to mean Gorgon gas is supplied to WA sooner than it otherwise would be," ACCC chairman Graeme Samuel said.
"This will provide a much needed increase in gas supply for consumers."
But that was questioned by the Domgas Alliance - a group of WA's largest gas users, including residential supplier Alinta, Synergy, Fortescue Metals Group and Dampier-Bunbury Pipeline - which expressed "dismay and disappointment" at the ACCC decision.
Chairman Tony Petersen said it was disappointing the ACCC had not stood up to the world's biggest oil companies - Mobil and Shell also have stakes in Gorgon - to ensure a fair deal for local consumers.
The joint venture partners were happy to compete for international customers but wanted protection in the domestic market.
"Every business and household can now look forward to even higher gas and electricity prices as a result," Mr Petersen said.
The alliance, which strenuously opposed joint marketing and also called for a domestic reservation policy, said 95 per cent of Gorgon sales were international and it was illogical that the joint venture needed protection for the relatively tiny amount of local sales.
"The ACCC's decision means that the biggest companies in China and India will enjoy the benefits of competition, while this is denied to Australian consumers," Mr Petersen said.
In its reasoning the ACCC said the WA market was too "lumpy" - with a small number of large users with long term contracts - there was no well-developed secondary market to allow gas trading and there were limited storage options.
"These market features are likely to oppose an additional investment risk on the joint venture partners," Mr Samuel said,
But Mr Petersen said the WA market was worth $1 billion a year and had operated for more than 25 years.
"Separate selling is already happening in (WA) and should be required for every domestic gas project in WA including the Gorgon project," he said.
"Because there are only two supplier groups (North-West Shelf and the Varanus joint venture), WA already has one of the most uncompetitive gas markets in the country which has resulted in WA prices being around three times the gas price in Victoria."
CHALPAT SONTI