It released its consultation paper seeking submissions today so it can improve transparency, something gas buyers have suggested has been lacking for years. This has been part of the government's "gas-fired recovery" plans since they were announced last year.
"The consultation paper identifies current barriers that impede liquidity at Wallumbilla and suggests potential options to grow the hub, such as anonymised trading, a market maker regime and the establishment of a virtual trading hub," a statement from energy and emissions reduction minister Angus Taylor said today.
"Stakeholder feedback on these options will inform development of a roadmap for Energy Ministers to consider in early 2022.
"The roadmap will set out a plan of potential market reforms and next steps to consider the implementation of the best options."
According to EnergyQuest's October report released Monday, Queensland's short-term domestic gas prices for the month were steady averaging $8.28/GJ ($8.28/GJ in September) at Wallumbilla and higher averaging $8.44/GJ ($8.36/GJ) in Brisbane, compared to those in September.
The issue brought up with a Henry Hub analogue is that it is harder to understand prices, and forward prices, with a gas hub many times smaller. Gas sellers have been particularly incensed by direct price comparisons with the US facility, or using it as a price reference point when market dynamics vary so much.
Santos managing director Kevin Gallagher, whose company operates two LNG plants in Australia, has said the Henry Hub had "no relevance" to Australia.
The two ‘work streams' identified by a group of energy ministers are "to accelerate development of the Wallumbilla Gas Supply Hub by identifying and progressing reforms to increase participation and enable more liquid, transparent trade of gas at the Hub".
And, "to review the pipeline capacity trading framework and identify and progress reforms to improve the framework to deliver greater value, competition and flexibility to the market."
The 82-page outline, released today, states energy ministers have worked on a series of reforms for the past five years "focussed on improving transparency, addressing excessive transportation charges, and facilitating the allocation of pipeline capacity to those who value it the most".
"However, while trading at the hub has developed over time, liquidity remains low compared to international precedents, limiting the transparency and long-term confidence in the market over the price of wholesale gas," it said.
Most gas contracting is still via bilateral agreements, whose details remain known only to the two parties.
Solutions were put together by ‘senior officials' from varied bodies that include the ACCC, the AEMC, the AER, and the Gas Market Reform Group and private consultancy KPMG.
Suggestions include anonymised delivery model for trade; streamlining prudential requirements across wholesale facilitated gas markets and lowering collateral requirements for forward dated products; a market making regime to encourage greater levels of confidence amongst smaller participants around the availability and price of gas at Wallumbilla, and a virtual gas trading hub.
The government sees traditional irritants such as low liquidity as compounded by newer fears, both around supply and predicted shortfalls as soon as 2023 to the future of domestic gas use on the east coast.
"New supply from LNG import terminals and northern supply routes could shift market dynamics significantly," it said.
"On top of this, there is increasing uncertainty over the level of demand-side usage for natural gas."
Impacts on demand range from development of hydrogen, to increased electrification and gas' role in a power market increasingly supplied by more intermittent renewables.
It plans to be guided by the National Gas Objective, the Strategic Energy Plan, and the Australian Gas Market Vision (Vision).
Consultation is open to the end of the year. The paper can be read in full here.
