ACCC authorises Queensland LNG producers to coordinate their maintenance schedules

14 April 2016

The Australian Competition and Consumer Commission has decided to authorise Australia Pacific LNG Pty Ltd, Gladstone LNG, and the Queensland Curtis LNG Project to discuss their maintenance schedules, maintenance providers, and maintenance techniques.  The ACCC has granted authorisation for five years, subject to a condition.

“Coordinating the maintenance undertaken at these facilities will increase the efficiency of these events and reduce the likelihood of major disruptions to domestic gas markets, which could occur if multiple maintenance events at the Applicants’ facilities overlap,” ACCC Chairman Rod Sims said.

The LNG producers’ facilities convert natural gas into LNG for export.  Each LNG facility is connected to gas wells in the Surat and Bowen basins of Queensland. However, they also purchase gas in nearby wholesale markets.

When the applicants’ LNG facilities are offline, they may redirect their gas to these wholesale markets for sale.  The LNG facilities use very large quantities of gas and can have large effects upon the market price when their facilities are offline.  Wholesale gas traders raised concerns that coordination between the LNG facilities would allow them to trade advantageously in gas markets, because each LNG facility will know when maintenance is going to occur.

To address this, the ACCC has imposed a condition of authorisation requiring the LNG producers to publicly disclose maintenance schedule information that they share with each other. The condition has been formulated in consultation with the LNG producers and market participants.

“These LNG producers can create significant volatility in domestic gas markets when they go offline for maintenance. This condition allows all market participants to know when maintenance is going to occur and to make sure that they aren’t exposed to unnecessary risk,” Mr Sims said.

As part of its current east coast gas markets review, the Australian Energy Market Commission (AEMC) released a draft recommendation that the LNG producers be required to publish two-year forecasts of their facilities’ capacity and gas demand, including any scheduled downtimes.  Submissions on the ACCC’s draft determination called for the ACCC to impose conditions on authorisation similar to the requirements in the AEMC draft recommendation. The ACCC decided this was not appropriate.

In this case, the ACCC has decided to keep the scope of the condition focussed upon  remedying information asymmetry issues about scheduled maintenance that arise from the proposed conduct.  However, in response to submissions on the draft determination, the ACCC has amended the condition to ensure that information published by the LNG producers is updated if it changes.

“Information is a crucial component for creating efficient, well-functioning markets and we understand why market participants want these LNG producers to provide more detailed information to all gas market participants. The AEMC is closely scrutinising the appropriate level of information these LNG producers should be required to provide to the market, and the ACCC considers that the AEMC’s review is the appropriate forum to assess these broader information transparency issues,” Mr Sims said.

Authorisation is granted for five years, rather than the longer periods sought by the LNG producers. The evolving nature of the east coast gas markets gives rise to significant uncertainty about the impact of the proposed conduct on related markets. In these circumstances, it will be appropriate for the ACCC to conduct a review in the near future to ensure the ACCC’s assessment of benefits and detriments remains accurate, and in order to assess the effectiveness of the condition of authorisation.

Authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010. Broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit from the conduct outweighs any public detriment.

More information about the application for authorisation is available at: Australia Pacific LNG Pty Ltd & Ors - Authorisations - A91516 & A91517

Release number: 
MR 48/16
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