ACCC proposes to conditionally authorise Queensland LNG producers to coordinate their maintenance schedules

18 February 2016

The Australian Competition and Consumer Commission has issued a draft determination proposing 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 proposes to grant authorisation for five years, subject to a condition.

The ACCC has also granted conditional interim authorisation to allow the LNG producers to discuss their plans for maintenance at each facility in the second half of 2016.

“Coordinating maintenance schedules at these facilities will reduce the potential for costly delays and allow the LNG producers more efficiently to manage the large quantities of natural gas that flow to their facilities,” ACCC Chairman Rod Sims said.

The LNG producers’ facilities convert natural gas into LNG for export.  The producers also participate in domestic gas markets, buying gas for their facilities or selling excess gas. When their LNG facilities are offline, they may redirect their gas to the domestic wholesale market for sale. Wholesale gas traders are concerned that coordination of maintenance will give rise to damaging information asymmetries as LNG facility maintenance can result in large changes to the wholesale price of gas.

To address this, the ACCC is proposing to impose a condition of authorisation requiring the LNG producers to publicly disclose maintenance schedule information that they share with each other. Interim authorisation is also subject to this condition. The proposed 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. The condition allows all market participants to know when maintenance is going to be occurring and to make sure 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) has 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.  Some market participants requested the ACCC impose these requirements on the LNG producers as part of the condition of authorisation.

In this case, the ACCC is proposing to confine the scope of the condition to remedying information asymmetry issues that arise directly from the proposed conduct (i.e. information about scheduled maintenance).

“Information is a crucial component for creating efficient, well-functioning markets.  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.

The ACCC is seeking submissions on its draft determination, including the proposed condition of authorisation, before making a final decision.

Interim authorisation commences immediately and will remain in place until the date that the ACCC's final determination comes into effect or it is revoked. The granting of interim authorisation in no way binds the ACCC in its consideration of the substantive application for 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 (Cth). Broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit from the conduct outweighs any public detriment.

Further information is available at: Australia Pacific LNG Pty Ltd & Ors - Authorisations - A91516 & A91517

Release number: 
MR 15/16
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