22 Apr 2016

The Australian Competition and Consumer Commission (ACCC) East Coast Gas Inquiry Report, released today, confirms the urgent need for policy and regulatory changes to enhance gas supply.

“The report highlights that the greatest risk to the market is regulatory failure, not market failure,” said Australian Petroleum Production & Exploration Association (APPEA) Chief Executive Dr Malcolm Roberts.

“The ACCC confirms that removing unnecessary government restrictions on exploration and development is the most effective way to boost supply, enhance competition and put downward pressure on prices.

“Australia has ample gas resources to supply domestic and export markets – if industry is allowed to develop these resources.  But, at a time of unprecedented demand, government policies risk creating an artificial shortage of gas and higher prices.

“The effects of an unnecessarily tight market are already being felt, especially in industry where gas is both a source of energy and an irreplaceable feedstock for manufacturing products such as glass and packaging.

“The risk is most pronounced in Victoria.  Almost 40% of the gas consumed by industry in Victoria is used as a feedstock.  Victoria also has the highest use of gas by households – 77% of households use gas.

“The ACCC was asked to conduct this review because it has the power to obtain confidential, commercial information.  Using this power, the Commission has amassed the most detailed and complete data on the market.  With this data, the Commission has been able to test all the claims made about the market.

“Contrary to claims by some parties, the ACCC has found – as the Productivity Commission found in 2015 – that there is no evidence of misuse of market power or other breaches of competition law.

“While market conditions were tight in 2012-2014, a range of gas supply agreements were made during this period. As the report finds, even more gas supply offers are now available.

“The Commission rejected arguments for domestic gas reservation, noting that such interventionist policies will quickly reduce supply and raise prices.

“The Commission has recommended measures to provide more public information on the market.  APPEA understands the desire for greater transparency.  APPEA will consider these recommendations on their merits and looks forward to working with governments and customers on ways to improve transparency.

“The industry welcomes the Commission’s findings and trusts that the public debate can now move on from discredited arguments to the real issues.  In particular, we are looking to the COAG Energy Council to make regulatory reform an urgent priority.  Governments must remove regulatory barriers to bring more supply and more suppliers into the market.”

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