ACCC waives 'Ring Fencing' obligation

The Australian Competition and Consumer Commission today issued its Final Decision to approve the separate applications of Santos, Origin Energy and Delhi Petroleum Pty Ltd (the South-West Queensland Producers), for the waiver of a 'ring fencing obligation'.

As part-owners of the Ballera to Mt Isa Pipeline (BMIP) in Queensland, this decision will allow the applicants to continue with their related business activities of gas production and sales.

The BMIP transports 35 per cent of the total gas consumed in Queensland to the mining community in the state's north west. Industry has also indicated the future potential for the pipeline to play a significant role in transporting PNG and/or Timor Sea gas to Moomba.

The producers approached the ACCC in March this year requesting the waiver of an obligation that will shortly come into effect. Complying with this obligation would require the producers to divest their significant gas production interests in South West Queensland.

In making the request, the producers said that the public benefits of structural separation of the two related business activities would not outweigh the costs each company would incur from doing so.

The ACCC considered that the public benefit from compliance would not be large where companies carried out their related business activities as if they were in fact structurally separated. This was thought to be the case where each company had implemented internal procedures and protocols that would limit the potential for anti-competitive conduct.

The ACCC approved the applications after conducting a public consultation process and receiving an undertaking from the producers regarding any new BMIP agreements. This undertaking requires the producers to submit to the ACCC new arrangements between their transmission and production interests. To approve these contracts the ACCC must be satisfied that they would not hinder competition.

"It is important to note that the granting of this waiver will not preclude the ACCC from reviewing the situation if market conditions change substantially at any time in the future", ACCC Chairman, Professor Allan Fels, said today. "The ACCC will continue to monitor the internal arrangements of the producers through its annual reporting requirements under the Code".

The producers originally requested a waiver of a further obligation not to share marketing staff, however the requests were withdrawn in early May after the release of the ACCC's draft decision on the matter.

The ACCC's final decision is made under section 4.15(a) of the National Third Party Code for Natural Gas Pipeline Systems.