MARCH 2014
AN AUSTRALIAN FIRST WALLUMBILLA GAS SUPPLY HUB ABOUT THE NEW GAS SUPPLY HUB Establishing a gas supply hub in Wallumbilla Queensland is the next step in energy market reforms aimed at increasing transparency and competition in east coast gas markets. The hub, the first of its type in Australia, is expected to support the efficient trade and movement of gas between regions, enhance gas trading transparency, and set a reference price for gas so participants can manage portfolio risk.
THE WALLUMBILLA GAS SUPPLY HUB IS THE NEXT STEP IN ENERGY MARKET REFORMS AIMED AT INCREASING TRANSPARENCY AND COMPETITION IN EAST COAST GAS MARKETS
WHY IS IT IMPORTANT? The new, voluntary market responds to emerging challenges in the east coast gas markets. Gas demand on the east coast is expected to treble from 745 to 2,182 petajoules in the next 20 years. Queensland in particular is experiencing substantial developments in liquefied natural gas (LNG) exports, which has increased the need for more flexible and transparent upstream transactions. This greater flexibility in gas trading benefits both domestic and export markets.
HOW DOES IT WORK? The hub provides a centralised trading, settlement, and clearing facility through an online portal and enables generators, users, producers, and retailers to manage their daily and future gas requirements.
It uses global best practice to provide a new trading environment. The one terajoule contract size allows for trading flexibility. It provides another trading mechanism for participants already operating in the Short Term Trading Market.
The new market began trading on 20 March 2014 and offers spot and forward-dated products for participants to trade at the hub. Spot transactions include core “dayahead” and “balance-of-day” products. The balance-of-day product enables parties to adjust their portfolio closer to real-time and to manage imbalances within the gas day. Pipeline capacity is offered as a trading opportunity which allows more efficient use of pipelines and helps create more opportunities to trade gas. Image courtesy of QGC
MARCH 2014
WHY WALLUMBILLA? Wallumbilla, west of Brisbane, was selected as the 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 gaspowered generation. The diversity of business activities and the number of industry participants at Wallumbilla creates a natural point of trade.
WHAT BENEFITS WILL THE SUPPLY HUB DELIVER? The supply hub has the potential to balance gas supplies at least cost, enabling market participants to better manage the financial risk associated with exposure to variable gas prices. It increases overall participation in gas markets by attracting large users (such as LNG plants, industrial users, and gas-powered generators). Gas is traded via one terajoule contracts, also allowing smaller players to enter the market. Over time, the Wallumbilla Gas Supply Hub will foster the entry of more participants in the market, increase competition, and create a price reference point. Supply hubs have worked well in other countries including the United States and Europe.
MORE INFORMATION See AEMO’s website: http://www.aemo.com.au/Gas/Market-Operations/Gas-Supply-Hub.
Image courtesy of Alinta