The Australian Competition and Consumer Commission has granted interim authorisation to Allgas Energy Ltd to allow it to negotiate sales of gas from the Papua New Guinea gas project.
Allgas is proposing to purchase significant volumes of gas from Papua New Guinea gas producers and then sell that gas to a number of customers in Queensland, predominantly for electricity generation.
Allgas sought authorisation as it believed that proposed contracts' effect may be that one or more customers would be unable, in a practical sense, to acquire gas from an Allgas competitor, or to do so only to a limited extent once contracts are signed.
The interim authorisation allows Allgas to:
- to discuss, negotiate and arrive at an understanding with any and each potential user as to the terms upon which Allgas would be prepared to supply, and as to the terms upon which the potential user would be prepared to acquire, gas acquired by Allgas from the PNG gas project;
- and to continue engagement of Comalco in any and all discussions and negotiations between Allgas and the producers and marketers of gas from the PNG gas project as to the terms upon which Allgas would be prepared to acquire, and as to the terms upon which the producers and marketers would be prepared to supply, gas from the PNG gas project.
The interim authorisation is subject to the following conditions that:
- it remains in force until either the ACCC revokes it under section 91(2) of the Trade Practices Act 1974, or the ACCC's final determination on the applications for authorisation comes into force;
- Allgas not discuss with Comalco the details of other prospective Allgas customers gas supply arrangements, nor involve Comalco in any discussion or meeting with the PNG Producers where such details are discussed.
Upon termination of this interim authorisation, any understandings which were authorised may be in breach of sections 45 or 47 of the Act and hence unenforceable except to the extent that they are authorised by a final authorisation.
Given the tight time frame for decision required by the applicant, the ACCC's ability to test the competitive implications of the applications for interim authorisation in the market place has been limited. This, combined with significant concerns raised by market participants in response to the proposals, has necessitated a cautious approach by the ACCC.
The ACCC denied Allgas' application for interim authorisation for:
- the making of any and each contract or arrangement between Allgas and any and each user including Comalco as to the terms upon which Allgas will supply, and the user will acquire, gas acquired by Allgas from the PNG gas project, or an offer in respect of such a contract or arrangement; or
- the giving effect to any and each contract, arrangement or understanding described above.
Having reached an understanding with a prospective customer regarding acceptable terms for gas supply, the ACCC would expect Allgas to draft a contract setting out those terms which was conditional upon authorisation. Such a conditional contract could then be brought to the ACCC for authorisation, invoking the full public authorisation process. Under s.45(9) of the Act, the making of a contract that contains an anti-competitive provision is not a contravention of s.45(2) if:
- the contract is subject to a condition that the provision will not come into force unless and until the corporation is granted an authorisation to give effect to the provision; and
- the corporation applies for the grant of such authorisation within 14 days after the contract is made.
The ACCC remains concerned at the potential effect on competition in the market place and the long term anti-competitive effects of implementing structural rigidities via the applicant's proposal. This is particularly the case as the gas and electricity markets in Queensland are continuing to evolve rapidly. The ACCC will monitor market developments to ascertain if this interim authorisation is having any unintended competition effects.