Today the AEMC released a draft report tracking changes in trading activity in Australia’s gas markets and the impact of reforms we have designed since 2016.

The Commission’s biennial review indicates a number of positive signs – and evidence that progress is being made towards the COAG Energy Council’s vision to establish a liquid wholesale gas market that provides the right market signals for investment and supply. However, the findings vary across the different gas markets and traded products. 

We are calling for stakeholder submissions on the draft report, specifically on the draft findings and whether recommendations for more market change are required.

The report was released as part of the Commission’s 2020 Biennial review into liquidity in wholesale and gas pipeline trading markets. A liquid market exists when no single transaction is likely to move gas prices excessively, individual trades can be easily executed, there is an ability to trade large volumes in a short period of time, and the market can recover after being exposed to shocks.

It is the second review of its type undertaken.

It tracks changes in liquidity in a number of east coast facilitated markets including:

  • Wallumbilla gas supply hub - significant liquidity growth with positive indicators across quantitative and qualitative metrics
  • Moomba gas supply hub - significant trading is yet to emerge
  • Victorian declared wholesale gas market - as a compulsory market continues to enjoy relatively higher levels of liquidity and stakeholder confidence
  • Short term trading markets – as compulsory markets they continue to enjoy relatively higher levels of liquidity and stakeholder confidence.
  • Day-ahead auction - While only introduced in 2019, the pipeline capacity day-ahead auction appears to have had a substantial effect on the secondary trade of pipeline capacity and is contributing to liquidity growth in east coast wholesale gas markets.

The east coast markets have seen extensive reform towards more flexible and resilient gas markets.

All the work undertaken to date has focussed on delivering against COAG Energy Council objectives to make it easier to buy and sell gas in Australia – and help keep the cost of getting gas from source to consumers as low as possible. 

The ability to move gas around efficiently is critical to the nation’s energy and economic future – today more than ever – not only for household and business use but also as fast-response fuel for electricity generation.

The report will set a baseline for the state of market liquidity against which the effects of the COVID-19 pandemic can be assessed in 2022. The economic effects of the pandemic may affect domestic and international demand, prices, and industry confidence both in overall terms and in relation to future liquidity development.

Surveys of gas market participants, conducted in early March, showed that stakeholders reported being either satisfied or very satisfied with liquidity in the DWGM, STTM and the day-ahead auction of pipeline capacity. Slightly lower levels of satisfaction were observed for the GSHs with much lower levels of satisfaction for the pipeline capacity trading platform.

A number of significant reforms are underway in the east coast that could contribute to further liquidity growth, particularly at the gas supply hubs and for pipeline capacity trading, and progress should continue to be monitored.

Media: Kellie Bisset, Media and Content Manager, 0438 490 041

Background on this review

In 2016, the AEMC completed a review of the gas markets and gas transportation arrangements on the east coast of Australia (the East Coast Gas Review). In the final report on the East Coast Gas Review, the AEMC recommended a number of metrics that would capture the characteristics of a liquid market and allow for the monitoring of liquidity in the Australian wholesale gas and pipeline capacity trading markets.

In the final report on the East Coast Gas Review the AEMC also recommended that it should report to energy ministers every two years on the growth in trading liquidity in these markets. In December 2017 the COAG Energy Council directed the AEMC to conduct a review into liquidity in wholesale gas and pipeline trading markets. This is the second biennial review.