In an Australian first, a voluntary gas supply hub has been established at Wallumbilla, near Roma, aimed at providing the gas industry with greater opportunity to buy and sell gas.
The new voluntary market is designed to respond to emerging challenges in the east coast gas markets. Queensland in particular is experiencing substantial developments in liquefied natural gas (LNG) exports, and according to the Queensland Government, this has increased the need for more flexible and transparent upstream transactions between parties.
The gas supply hub is an exchange for the wholesale trading of natural gas. Participants place anonymous offers (to sell) or bids (to buy) a specified quantity at a specified price, which are automatically matched on the exchange to form transactions.
Energy and Water Supply Minister Mark McArdle said the establishment of the trading exchange had been driven by the rapid growth of the coal seam gas (CSG) industry in Queensland.
“Demand for gas in eastern Australia is set to treble over the next 20 years,” Mr McArdle said. Mr McArdle said the Wallumbilla Gas Supply Hub offers market participants more speed, flexibility and transparency to do business.
“In the past, contract arrangements have been too cumbersome. Often by the time parties had agreed to a trade the opportunity had been lost,” he said.
The hub will allow traders to: buy and sell gas on standardised terms and conditions at specified delivery points; trade spot and day-ahead products; trade forward contracts for the first time.
The hub will also provide the first ‘bulletin board capacity listing service’ for the east coast allowing participants and pipeline operators to transparently advertise their interest to buy and sell capacity on pipelines.
Mr McArdle said commodity markets take time to develop but the early signs are very encouraging.
“AEMO (the operators of the hub) forecast the hub would trade 50 terajoules of gas by the end of the financial year and while the hub has only been operating for two weeks it has already traded 60 terajoules.”
Wallumbilla, west of Brisbane, was proposed as an initial gas trading exchange location because it is a major transit point between Queensland and the gas markets on Australia’s east coast. Wallumbilla acts as a collection point for major gas fields and a supply point for demand centres in Gladstone and Brisbane, and is located near gas storage facilities and gas-powered generation. The diversity of business activities and the number of industry participants at Wallumbilla creates a natural point of trade.
Alinta is one of a growing number of companies who have registered to trade at the new hub.
Alinta’s east coast gas interests include Braemar 1, a 500 MW gas power plant comprising three open cycle gas turbine units, located in southern Queensland. The business also owns around 150 km of gas pipeline between Condamine and Braemar, which is exclusively used to supply the Braemar Power Station. The company has considerable gas interests in Western Australia.
Alinta Gas Trading Manager, Peter Frost, said he was looking forward to the benefits his company expected to realise through the new market.
“Setting aside any impact from the carbon price, spot and wholesale electricity prices are at low levels and gas prices are steadily increasing as a result of the growing LNG export industry. In this environment, Alinta sees value in gas being sold as a commodity rather than a fuel to generate electricity,” Peter said.
“Demand for gas in eastern Australia is set to treble over the next 20 years.”
For more information visit the AEMO’s website: www.aemo.com.au/Gas/ Market-Operations/Gas-Supply-Hub.