The National Gas Code is the mechanism by which the economic regulation of gas pipeline and distribution companies is implemented.

Mr Clark said that while there had been some positive, one-off amendments to the Code during the past eighteen months, the AGA continues to have fundamental concerns with the Code and its application.

"The Code has proved to be a barrier so far as greenfields projects are concerned, for both transmission pipelines and distribution network extensions," Mr Clark said.

"Many prospective projects remain on the shelf because they offer inadequate returns and regulatory risks which their proponents (and shareholders) are not prepared to accept.

"The process is also costly and its benefits somewhat scant at the consumer level. Regulators are seen by regulated gas businesses to be obsessed with legalities and process issues rather than looking to the outcomes of their decisions."

"Regulators would do well not to be restrictive about efficiency sharing," he said. "When distributors are able to reduce costs while maintaining or improving levels of service, why not allow them to retain a reasonable proportion of the saving?"

Mr Clark said that while there was evidence that the Code was able to be amended - several changes had been made to it in the light of experience - the process was somewhat unwieldy and more suited to facilitating minor changes.

"Almost five years after the Code's adoption and twenty or so Access Arrangements later, it is generally acknowledged that a major review is warranted, and we look forward to the commencement of such a review, possibly by the Productivity Commission, later in the year," he said.

He added that proposals being developed by the AGA for the review would be aimed at providing firm guidance to regulators, to reduce the scope for inappropriate regulatory risk.

Another major proposal could include providing gas distribution businesses with the right to choose the form of access and pricing regulation from an expanded and more flexible range of options.

Mr Clark also told delegates at the Gas Industry Forum that:

* there is an urgent need for greater upstream gas supply competition, if the gains from midstream and downstream gas market reform are not to be squandered by rising well-head gas prices;

* the AGA is concerned that the moves of Australian States and Territories to full gas retail competition (FRC) has been disjointed, with the costs of FRC higher than necessary. Mr Clark added that the AGA has been concerned by some governments attempting to impose retail price regulation in some jurisdictions and retain reserve pricing powers in others; and

* the AGA has welcomed the key role envisaged for natural gas within the National Energy Policy. Mr Clark emphasised that AGA research had found the total national greenhouse emissions inventory could be reduced by a significant 8 percent if natural gas and LPG were used nationwide for the basic domestic applications of water heating, space heating and cooking.