One of the revelations in the ACCC’s superb gas report yesterday is how advanced is the cartel behaviour of the Curtis Island gas exporters:
• The upstream market is highly concentrated and dominated by the three LNG exporters and their associates. In 2021, the three LNG exporters and their associates had influence over close to 90% of the 2P reserves in the east coast, through a combination of their direct interests in 2P reserves, associates, JVs and exclusivity arrangements. This highlights the effective control that the LNG exporters have over the supply and development of gas in the east coast, as well as competition in the domestic market.
• JVs can adversely affect competition if participants do not put in place and adhere to robust ring-fencing arrangements that prevent the sharing of commercially sensitive information,8 with other projects in which JV participants have an interest. A JV participant can also have the incentive and opportunity to exploit their position in a JV to delay the development of gas if it improves the participant’s competitive position in other projects.
• Joint marketing by incorporated and unincorporated JVs is more prevalent than we expected, with the LNG exporters and some other producers engaging in joint marketing in the domestic market without authorisation. This results in a material reduction in the number of producers competing to supply gas into the domestic market.9
• Exclusivity provisions in GSAs entered into between domestic producers (as sellers) and LNG exporters (as buyers) are restricting the ability of domestic producers to compete to supply gas into the domestic market. These provisions can also reduce the incentive that domestic producers have to develop gas over time and result in development decisions being based on the requirements of the LNG exporters, rather than the domestic market.
• Mergers and acquisitions of other producers, tenements or interests in JVs by larger producers, can result in a reduction in producers competing to supply gas into the market and slow the progress of gas development.
Together with the high degree of concentration in this part of the market, these arrangements contribute to a lack of effective upstream competition in the east coast. They may also increase the risk of coordinated conduct and increase the market power of the LNG exporters. This is concerning, given the supply conditions that are expected to prevail in the east coast in 2023 and beyond, and the reliance that will be placed on the LNG exporters to supply more gas into the domestic market.
This is advanced monopolisation to deliver economic rents with clear, indeed embedded, collusion.
I noted earlier that the cartel has begun to play politics in the past few days by taking its boot off the supply of gas in the east coast spot market where prices are now crashing.
So, do not mistake this for any kind of commitment to lower prices. This is gaming by said cartel.
There are further reports today that the cartel is now meeting to discuss how it can pervert the political economy to make itself invisible:
Australia’s three largest east-coast gas exporters have held an emergency meeting to discuss boosting domestic supplies after federal Resources Minister Madeleine King threatened unprecedented export controls if the industry fails to act first.
Representatives from the three Queensland producers – Origin Energy-backed APLNG, Shell’s QCLNG joint venture and Santos’ GLNG – joined a conference call on Monday afternoon, according to senior gas industry sources familiar with the talks.
The meeting was convened by their industry group, the Australian Petroleum Production and Exploration Association, and discussed the drafting of a non-binding “heads of agreement” to take to government in a bid to formalise their commitment to plugging a shortfall predicted to hit the eastern seaboard next year.”
In short, the gas cartel is colluding to hide collusion. LMAO.
Labor must ignore this garbage and go for the jugular: a $7Gj price trigger installed into a renewed reservation regime.
If the cartel won’t play, then make it law. If it bucks and won’t develop new sources of gas then apply “use it or lose it” laws to their reserves as well.
Smash the rorting bastards.
