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BHP, Esso to compete in marketing gas from Gippsland Basin in Australia

BHP Billiton Petroleum and Esso Australia, an affiliate of ExxonMobil, have agreed to separately market their share of gas produced from the Gippsland Basin Joint Venture (GBJV), from 2019.

As part of this effort, the firms voluntarily provided court enforceable undertakings to the Australian Competition and Consumer Commission (ACCC) to separately market their respective share of gas from the GBJV, ending a 48-year-old joint venture.

Under the 50:50 joint venture, the two companies have been marketing gas from the offshore fields in Victoria's Gippsland Basin since 1969.

Concerns were raised during the 2015 East Coast Gas Inquiry conducted by the ACCC about the joint venture agreement’s significant increase in market power as a supplier for gas supply from 2010 to 2015.

As a result, the ACCC has investigated the effect of joint marketing arrangements and identified a significant reduction in the level of competitive constraint in southeastern Australia.

In 2017, production from the GBJV is expected to reach a record level of 330 petajoules.

ACCC chairman Rod Sims said: “Wholesale gas buyers in this region have become highly reliant on the Gippsland Basin Joint Venture as their primary source of supply.

“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.

“We believe that competition in this market was negatively affected by the elimination of independent rivalry between BHP and Esso.”

ACCC said that the latest decision will allow buyers to benefit in competing and potentially have different offers from Esso and BHP in the future including improved prices and contract terms for supply.

Sims added: “The ACCC continues to monitor the Australian gas markets and availability of contracts as part of its current gas inquiry.”