Reforming the Eastern Australian gas market

Abstract

We analyse the deficiencies behind the Eastern Australian gas market by applying a framework proposed by the International Energy Agency. We show that this gas market has structural weaknesses that include inadequate supplies at hubs; limited pipeline capacity; predominance of long-term gas supply contracts; deficiencies in design; and difficulties with third party access. We provide five policy actions to help remedy these deficiencies and to help establish a functional gas market. Although our study is limited to Australia, it, nevertheless, provides insights for countries in the Asia Pacific region, which may wish to move towards more competitive gas markets, including trading hubs. KEYWORDS competition, hub, LNG, market regulation, prices "… a liquid wholesale gas market … provides market signals for investment and supply, where responses to those signals are facilitated by a supportive investment and regulatory environment, where trade is focused at a point that best serves the needs of participants, where an efficient reference price is established, and producers, consumers and trading markets are connected to infrastructure that enables participants the opportunity to readily trade between locations and arbitrage trading opportunities." (COAG Energy Council, 2014).This is an open access article under the terms of the Creative Commons Attribution-NonCommercial License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes.