This biennial review tracks the growth in liquidity in wholesale gas and pipeline trading markets. It enables the AEMC to monitor progress and assess the effectiveness of our gas reform package to support faster and more efficient gas trading and access to pipeline transportation along the east coast of Australia. As implementation of the complete reform package will take several years, our first review of gas market liquidity focuses on providing a baseline for future reviews.

Final report

On 16 August 2018 the AEMC published a final report that contains the baseline measures of liquidity in the facilitated wholesale gas and pipeline trading markets, and the Commission’s findings. 

These measures were calculated based on the metrics and methodologies proposed in the scoping paper that was published by the AEMC on 13 February 2018.

This first review focused mainly on liquidity at the gas supply hubs, the short-term trading market and the Victorian Declared Wholesale Gas Market where information was publicly available. 

We found that liquidity at the gas supply hub at Wallumbilla has increased over the past two years. This positive change was reflected in almost all metrics of liquidity that formed part of the analysis.

Results for the other markets were more diverse and it is too early to assess the trends for gas market liquidity from these initial metrics.

Also, these measures do not examine bi-lateral or over-the-counter (OTC) markets and in particular, the long-term gas and transportation contracts that underpin much of the market. This is because the AEMC has no visibility of those markets and agreements at this time.

As such, this review has not examined or commented on liquidity or trends on these aspects of the market. Without examining all aspects of the gas market, any trends or analysis is limited to the particular facilitated market, rather than on the market overall.

Publication of liquidity indicators

From 16 August 2018, the Australian Energy Regulator (AER) will publish the quantitative indicators developed for the biennial liquidity review on their Industry statistics webpage.

This follows the AEMC’s recommendation in our East coast gas review that the AER publish the indicators on a regular basis to promote market transparency. 

Background 

On 20 December 2017 the Council of Australian Governments Energy Council (the COAG Energy Council) provided the AEMC with terms of reference to conduct a biennial review into the growth in liquidity in the wholesale gas and pipeline capacity trading markets. 

Broadly, the terms of reference require the AEMC to:

• monitor changes in liquidity in wholesale gas and pipeline capacity markets
• report on the effectiveness of reforms
• identify the need for any further reforms, if appropriate.