Australia: North West Shelf Gas - Plenty Has Changed Since 1977

The Australian Competition and Consumer Commission (ACCC) has reportedly commenced an investigation into the joint marketing activities of the north west shelf joint venture (NWSV), an arrangement that has been in place since the 1970s1.

The NWSV is responsible for the marketing of gas and the administration of contracts for the supply of gas to customers in Western Australia on behalf of its six joint venture participants - Woodside Energy Ltd, BP Developments Australia Pty Ltd, Chevron Australia Pty Ltd, BHP Billiton (North West Shelf) Pty Ltd, Shell Development (Australia) Proprietary Limited and Japan Australia LNG (MIMI) Pty Ltd which joined the venture in the mid-1980s.

In the late 1970s, the then joint venturers saw fit to apply to the Trade Practices Commission (TPC) (which became the ACCC) for authorisation under section 88 of the (then recently introduced) Trade Practices Act 1974 (Cth) (TPA). The joint venturers sought an exemption from the operation of the TPA so that they could discuss and agree common terms and conditions (including price) for the marketing and supply of natural gas to consumers at all levels of the supply chain in Western Australia.

Whilst an agreement between competitiors that is exclusionary, fixes prices or substantially lessens competition would (absent an authorisation) be prohibited by the TPA, the then TPC authorised the joint marketing activities of the joint venturers as it determined that it would be likely to result in public benefit. The main perceived benefit was that protection from the TPA encouraged and supported the development of energy resources in the North West Shelf and encouraged investment in and exploration of additional energy sources. Accordingly, the joint marketing activities of North West Shelf Gas Pty Ltd (NWSG) were exempted from the operation of the TPA in 1977 for an unlimited period of time. A further authorisation was granted in 1998 to cover incremental activities of the NWSV including the participation of Japan Australia LNG (MIMI) Pty Ltd.

In December 2007, NWSG, the company incorporated to conduct the NWSV, applied to the ACCC on behalf of the joint venturers to have the 1977 authorisation revoked. It is apparent that this application was made on the basis that as a result of the joint venture defences introduced into the TPA in 2007, NWSG considered that authorisation of the joint marketing activities was no longer required. An arrangement between competitors that contains an exclusionary or price fixing provision constitutes a per se breach of the TPA. However, if the arrangement was entered into for the purposes of a joint venture, such an arrangement will not breach the TPA unless it is for the purpose, or has the effect, of substantially lessening competition in a market. The joint venturers indicated their intention to continue to participate in the joint marketing activities without authorisation and that the joint venturers do not consider the joint marketing activities to have the purpose, effect or likely effect of substantially lessening competition.

The ACCC revoked the authorisation in March 2008.

A number of submissions made by interested parties to the ACCC in support of the revocation also stated that there was no longer a compelling public benefit argument in support of NWSG's joint activities as the circumstances that formed the basis for the grant of the authorisation had changed substantially since 1977. The lack of competition between the joint venturers (who as a group control the majority of domestic gas production in Western Australia) has been cited by some commentators as a reason for higher gas prices in Western Australia in recent times2.

It has since been reported that the ACCC has commenced an investigation into the marketing operations of NWSG3. Should the investigation proceed, the ACCC will undertake market inquiries to determine whether the NWSG marketing arrangements have the purpose, effect or likely effect of substantially lessening competition within that market. To date, the ACCC has not indicated any outcome of an investigation. Should an investigation lead to the ACCC forming a view that the joint marketing activities has the effect of substantially lessening competition, it is open to the ACCC to seek remedies including injunctions to prevent NWSG from continuing to market collectively. This would conceivably force participants in the NWSG to undertake domestic marketing and supply arrangements with consumers (including retailers) individually and, potentially, in competition with each other.


1 Reuters, ACCC probes North-West Shelf gas (2008) Sydney Morning Herald at 20 October 2008; Shane Wright, Householder winner in NW Shelf shake-up (2008) The West Australian at 20 October 2008; Lenore Taylor, Gas price 'inflated', watch dog called in (2008) The Australian at 20 October 2008.

2 Ibid.

3 Ibid.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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