The project, expected to be operating by 2009, involves the joint production and sale of gas from PNG into Australia by project participants including ExxonMobil and Oil Search.
In issuing its draft determination, the ACCC noted that “such conduct would normally breach the Trade Practices Act 1974” but the commission had decided that the public benefits of the project outweighed any “anti-competitive detriment”.
ACCC commissioner Ed Willett told PNGIndustryNews.net that the commission had to adopt a cautious approach to the authorisation given that some of the project participants were also producers within the Australian market and, due to this fact, authorisation was granted for only the first 16 years.
“We wanted to make sure that there wasn’t scope for the joint marketing arrangements also providing opportunities for information to be gathered by players on a national basis, to undermine competition in the gas markets nationally,” he said.
Willett explained that project participants would now be required to operate within a “framework of confidentiality and ring-fencing arrangements” and any joint marketing undertaken outside of these arrangements would not be authorised.
“We weren’t sure, with such a long time period, that the benefits of the proposal would outweigh the anti-competitive detriments – 30 years is a very long time. We also took into account evidence that 15 or 16 years would be sufficient protection for proponents of the joint marketing arrangements, so that it wouldn’t mean the project not going ahead,” he said.
“Taking those things into account we thought 15 or 16 years, depending on when the starting point is, was an appropriate time period and we could have confidence there would be a net benefit associated with the arrangements.”
The ACCC acknowledged that concerns had been raised that the project would dominate the Queensland market and had the potential to “stifle growth” of the coal seam methane industry with customers having “limited opportunity to negotiate a better price or find an alternative supplier”.
Applicants and other interested parties have until February 6 to make any further submissions to the ACCC in relation to the draft determination.
Earlier this week, major customer for the PNG Gas project, the Australian Gas Light Company, converted an existing conditional sales agreement into a binding contract. In a deal worth almost $AU5 billion, AGL committed to taking 1500 petajoules over 20 years, more than one-third of the total gas expected to be shipped from the project.
