BHP Billiton have inked an agreement to end an Australian marketing joint venture which has been running for close to five decades. Consequently beginning in 2019 the two firms will commence separate marketing of the gas produced from Gippsland Basin. This follows pressure applied by the competition watchdog in Australian as concerns rise of soaring gas prices as well as supply.
According to the ACCC (Australian Competition and Consumer Commission) the joint marketing venture had the likely effect of reducing competition in the gas supply market especially in the country’s southern parts. Last year the ACCC had raised concerns that the joint marketing venture had a tight grip on gas produced from the Gippsland Basin, which is the largest producer in Australia’s southern states. At the time the ACCC hinted that it might be forced to demand the breakup of the joint marketing venture. In the event that BHP and Exxon Mobil had not broken up the venture voluntarily the ACCC would have taken them to court.
Per an analyst at Wood Mackenzie, an energy consulting firm, separate gas marketing would have a little effect on domestic gas prices since the determining factor of the prices was the export market and not the joint marketing venture.
“However the move will add an administrative burden and potentially complicate and delay expansions to gas supply from the (Gippsland Basin) project in the future,” Saul Kavonic, an analyst at Wood Mackenzie, said.
For a long time the two firms had insisted that the joint marketing venture led to cutting down of costs. Last year in April ExxonMobil warned that the breakup of the venture would hamper investments in the Gippsland basin and consequently make it the bringing of new supplies difficult.
Per the ACCC, the number of offers from gas suppliers that large gas buyers such as manufacturing firms were getting were at most two for multi-year deals. But with the joint marketing venture broken up, there would be an increase in the number of offers.
In Gippsland Basin production is expected to fall to 244 petajoules next year down from 330 petajoules recorded this year. This is due to the fact that one of the Basin’s large fields has been exhausted before the expected time.
The ending of the joint marketing venture comes in the wake of Exxon Mobil indicating that it will begin publishing reports with regards to how climate policies are likely to impact its business. This came after pressure from investors.