The proposed development of a natural gas pipeline from Papua New Guinea to eastern Australia has the potential to spur on the development of new Queensland gas fields, an Australian Competition and Consumer Commissioner, Mr Ed Willett*, said today.
This extra development would occur through the construction of spur lines to the PNG pipeline, he said.
"And crucial to the success of such projects would be the access regime applied to the pipeline", Mr Willett said.
There were four major options for providing the new gas supplies that will be required to meet demand in south-east Australia beyond 2012. These included the discovery of new reserves in south-east Australia; the commercial development of coal seam methane; the connection of the massive northern gas reserves to south-eastern Australia through new pipelines; and the proposed PNG pipeline.
"Ultimately the market will decide which option, or combination of options, is able to deliver the gas in the most efficient manner.
"At this stage substantial new government intervention does not seem necessary in order to ensure continued gas supply to the south-east.
"However, it is important that the underlying policy settings ensure that the option or options that proceed are in the best interests of gas customers.
"Investment decisions in the gas sector have long lead times.
"Generally, except in the unlikely circumstances of unconstrained market growth, one large project's advancement can mean another project's deferral.
"That is why intervention to facilitate one option over another needs to be carefully considered.
"Australia's relatively low energy and gas prices provide industry with a strong competitive advantage. This has been boosted by increasing competition in the gas market over the past decade, but competition remains immature. Some segments of the gas market will not be subject to effective competition for many years.
"So the best approach to maintaining Australia's low energy prices is to continue to facilitate competition where this is feasible.
"Where competition is not feasible, effective regulation should be applied to restrain monopoly positions and mimic effective competition.
"This is where the Australian Competition and Consumer Commission comes into the equation".
Mr Willett said Australia's gas access regulatory regime had delivered significant benefits for gas producers, pipeline owners, consumers, and the economy as a whole.
"There has been a significant increase in pipeline construction in Australia under the gas Code. Gas now makes up a much greater proportion of our energy mix, and consumers and business have benefited from lower prices".
The PNG project could deliver further significant benefits, particularly to the PNG, Australian and Queensland economies. It will provide a valuable source of power for much of north and central Queensland that has the potential to promote the development of other gas fields and mining and industry which will benefit from lower prices.
"The pipeline also has the potential to be a very powerful source of competition for existing gas sources and pipeline owners.
"But Australia will only maximise these benefits if the access regime for the pipeline properly takes into account the rights of all parties involved in the project, including third parties who wish to gain access to the pipeline, in order to promote further economic development".
*Mr Willett was addressing the Australia and PNG Gas Conference in Brisbane. Copies of the full speech will be available from the ACCC speeches.