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About gas: Gas markets

Fact box gas 3Most gas in Australia is traded bilaterally via long term contracts between gas producers and  their customers: energy retailers and large industrial gas users. Transmission pipelines connect gas fields to gas consumers in the same way as railways and trucks connect rural farmers to city markets, and pipeline operators sell the space, called capacity, on their transmission pipelines.

The East Coast market has some facilitated wholesale gas markets which enable large customers to buy gas without a long-term contract so they can meet short-term fluctuations in their demand, balance gas load and increase flexibility in their operations.

Three gas regions
The locations of gas fields and pipelines in Australia means there are three distinct gas regions: the East Coast which includes Queensland, NSW, the ACT, Victoria, Tasmania and South Australia; the Western region which includes Western Australia; and the northern region which includes the Northern Territory. All three regions sell gas to domestic and international customers. The East Coast gas region is an interconnected market with pipelines joining the five States and the ACT. The scheduled completion of the Northern Gas Pipeline will join the Northern region to the East Coast market near Mount Isa.

APGA says box gas 3a cropped

East Coast facilitated markets
In 2014, a new model wholesale market was introduced in Wallumbilla, Queensland, where participants voluntarily trade gas either on a spot basis or a forward-dated basis.  Wallumbilla, west of Brisbane, is a major transit point between Queensland and the gas markets on Australia’s east coast and gas can be shipped from there to Brisbane and Gladstone or south to other parts of the East Coast market.

The Australian Energy Markets Operator (AEMO) operates the short-term markets in Adelaide, Sydney and Brisbane and the Declared Wholesale Gas Market in Victoria. The purpose of these wholesale markets, more properly known as facilitated markets, is to provide balancing mechanisms to increase options for trading in gas for those who do not have a long-term contract, or have spare capacity, or have a short-term need for more gas.

In 2016, Moomba Gas Supply Hub opened. The Moomba Hub uses the same trading platform, settlement systems, and operates within the same regulatory framework as Wallumbilla. The introduction of the second hub was aimed at increasing opportunities to trade between the southern markets and the liquefied natural gas export market in Queensland, and to encourage new participants, including smaller producers, large users and retailers.

©Roslyn Budd - www.buddphotography.com.au

©Roslyn Budd – www.buddphotography.com.au

Transmission pipeline market frameworks

There are two methods used to sell pipeline capacity: contract carriage and market carriage. Under contract carriage, a pipeline owner and a gas shipper negotiate a contract, usually for ten years or more, guaranteeing access to pipeline capacity.

This system has been in operation in Australia for decades and the long-term stability it provides for both parties has enabled the significant investments required for such large-scale infrastructure.

Shippers with long-term contracts are entitled to what is known as firm capacity, which guarantees that shipper transmission rights and priority in the pipeline, 365 days a year. The shipper is required to nominate how much of their guaranteed capacity they will use each day. If a shipper does not use all of their contracted capacity, they are free to seek out other shippers to sell that spare capacity to on the secondary market.

Pipeline operators can also offer for sale spare capacity. This capacity will be offered on an ‘as available’ basis and can be disrupted or delayed at relatively short notice.

Under the market carriage system, which operates only in the Declared Wholesale Gas Market Victoria, a shipper is not required to enter a pipeline capacity contract. In this market, facilitated by the Australian Energy Markets Operator (AEMO), a participant’s dAPGA says box gas 3b sizedaily gas flow is determined by its bids into the wholesale gas market. The bids are despatched according to price and pipeline charges are based on the actual gas flows. The market carriage system in the Declared Wholesale Gas Market Victoria is similar to the transportation frameworks for gas distribution systems which are characterised by a very large number of users

Bi-directional flows

Another recent innovation is investment in bi-directional pipelines. Traditionally, long transmission pipelines have linked remote gas production basins with a demand centre such as a manufacturer or city. In recent years, there has been a proliferation of linkages between major pipeline networks and these now provide pipeline operators with the ability to direct gas flows in response to regional shortages or abundances.

Bibliography
Australian Energy Regulator, State of the Energy Market Report 2015.
Australian Energy Markets Commission, Energy markets overview
Australian Energy Markets Operator, Gas market operations

Last updated on 18 Jan 2017 by kpolglaze