The Australian Competition and Consumer Commission has informed the PNG Gas Producers* that it has granted interim authorisation to the PNG Gas Project, now including Santos and ExxonMobil, to jointly market gas.
"The ACCC has granted this interim to enable the PNG Producers to progress the project while the ACCC assesses whether joint marketing of PNG Gas is in the public interest", Mr Rod Shogren, Commissioner with responsibility for energy affairs, said today.
In support of their application the PNG Producers claim that the volumes of gas required for the project to proceed have increased, and hence the necessity for ExxonMobil and Santos's participation in the project. Both these parties already have substantial interests in gas supply in Queensland and their participation in the PNG project would give them access to detailed pricing and terms and conditions of PNG gas sales negotiations and contracts.
A large number of interested parties were consulted prior to the ACCC making this decision.
"Almost all submissions received supported the application for interim authorisation, although many sought the introduction of ring fencing measures to ensure customer marketing information did not flow to Santos' or ExxonMobil's affiliated gas production companies in Queensland".
The ACCC's interim authorisation is conditional upon the PNG Producers entering into a confidentiality deed that restricts the flow and use of confidential marketing information. The ACCC also sought and received an assurance from the PNG Producers that they will offer to enter into similar confidentiality agreements with customers prior to commencing gas sale negotiations.
"Customers will have a right of action against any PNG Producer that releases confidential information or uses it in a way that breaches the confidentiality agreement", Mr Shogren said. "Should the PNG Producers fail to comply with any of these assurances, the ACCC would consider revoking the interim authorisation".
The ACCC understands that the PNG Producers intend to provide a further detailed submission in support of their application for authorisation. The ACCC will then consider the full application for authorisation of joint marketing.
"In considering the application, the ACCC will focus on whether separate marketing of PNG gas is feasible, since separate marketing is clearly more competitive than joint marketing", Mr Shogren said.
When considering the application for authorisation the ACCC will examine both the upstream arrangements in PNG and the nature of the market into which the project gas is to be sold. In its assessment the ACCC is likely to seek additional information in support of the statement that it is not commercially practicable for the project to proceed without the involvement of Santos and ExxonMobil as full Project Sponsors. The ACCC is also likely to focus on the implications of their involvement – for example the voting rights in agreements supporting the Joint Venture.
*The PNG Gas Producers comprise Chevron Australia, Oil Search, Orogen, ExxonMobil, Merlin Petroleum, Petroleum Resources and Santos. These companies all hold interests in PNG gas fields and intend to sell gas through a proposed PNG to Queensland pipeline.