ExxonMobil, BHP end Australia gas sales joint venture

ExxonMobil, BHP end Australia gas sales joint venture
Logos of ExxonMobil are seen in its booth at Gastech, the world's biggest expo for the gas industry, in Chiba, Japan April 4, 2017. REUTERS/Toru Hanai
Text size Aa Aa

By Sonali Paul

(Reuters) – ExxonMobil Corp <XOM.N> and BHP Billiton Ltd <BHP.AX> have agreed to end a nearly 50-year-old gas marketing joint venture in Australia, bowing to pressure from the nation’s competition watchdog amid concerns about gas supply and soaring prices.

The Australian Competition and Consumer Commission (ACCC) and the companies said on Monday they would start marketing their gas from the Gippsland Basin separately, starting in 2019.

“The ACCC was concerned that the joint marketing arrangements were likely to have resulted in a substantial lessening of competition in the market for the supply of gas to buyers in the southern states,” ACCC Chairman Rod Sims said in a statement.

The commission raised concern last year about the tight grip the Gippsland Basin joint venture, the biggest producer in the country’s southern states, had on the market. The ACCC flagged it might force the firms to sell their gas separately.

It could have taken ExxonMobil and BHP to court had they not agreed to break up the marketing joint venture.

But an analyst at energy consultants Wood Mackenzie said separate marketing of the gas was unlikely to soften domestic gas prices much. Gas prices were effectively being determined by the liquefied natural gas export market, not the ExxonMobil-BHP joint venture, analyst Saul Kavonic said.

“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,” Wood Mackenzie’s Kavonic said.

BHP shares rose 1.5 percent on Monday, roughly in line with other big miners.

BHP has cooperated with the ACCC and strongly believes it has complied with the Competition and Consumer Act at all times,” the company said in an emailed statement.

The companies had long argued that joint marketing actually saved costs. ExxonMobil had warned in April 2016 that any unwinding of joint marketing “could make it more difficult to invest and bring on new supplies in Gippsland”.

“The two companies will cease marketing gas jointly at the end of 2018,” Esso Australia, the local arm of ExxonMobil, said in an emailed statement on Monday.

One of the commission’s principal concerns was that big gas buyers, like manufacturing companies, were getting only one or two offers at most from gas suppliers for multi-year deals. Having BHP and ExxonMobil market separately would introduce new offers.

Production from the Gippsland Basin venture is forecast to drop to 244 petajoules (PJ) in 2018 from a record 330 PJ this year, as one of its big fields has run out of gas earlier than expected, the commission said in a report last week.

(Reporting by Sonali Paul in MELBOURNE; Additional reporting by Rushil Dutta in BENGALURU; Editing by Stephen Coates and Kenneth Maxwell)

euronews provides breaking news articles from reuters as a service to its readers, but does not edit the articles it publishes. Articles appear on for a limited time.