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Australia – Draft Gas Supply Hub Exchange Agreement.
5 August, 2013

 

Legal News & Analysis – Asia Pacific – Australia – Energy & Project Finance

 

WHAT YOU NEED TO KNOW

 

 

  • The Draft Gas Supply Hub Exchange Agreement (version 4.0) has been released for public consultation.
  • The Exchange Agreement will be a multi-lateral contract between AEMO and market participants who elect to become members of the Gas Trading Exchange.

 

On 1 July 2012, the Australian Energy Market Operator (AEMO) released the Draft Gas Supply Hub Exchange Agreement (version 4.0) (Draft Exchange Agreement) for public consultation. The Draft Exchange Agreement is the latest evolution in the quickly expanding short term gas trading market in Australia. 


When finalised, the Draft Exchange Agreement will establish the terms for participation in the Gas Trading Exchange (GTE), which has been committed to be implemented in Wallumbilla, west of Brisbane, by early 2014. The GTE aims to enhance transparency and reliability of supply by creating a voluntary gas market that offers a low cost, flexible method to transfer title of gas from one party to another. The GTE is the first project of this kind and the release of the Draft Exchange Agreement is the latest step in the revolution of upstream gas markets.


This article will provide a brief overview on the Draft Exchange Agreement, including where it sits within the national legal framework of gas regulation in Australia, what it does, and what you need to know. 


Legal Framework


The national legal framework for the regulation of gas in Australia is defined through the intergovernmental Australian Energy Market Agreement, the National Gas Law (NGL) and the National Gas Rules (NGR). The NGL applies in all States and Territories, except Western Australia which has adopted a modified
version.


To facilitate the implementation of the GTE, a number of amendments to the national legal framework have been proposed. Broadly, the proposed amendments aim to achieve the following breakdown in regulation:

 

 

  • the NGL will deal with a limited number of high level features of the regime;
  • the NGR will contain the most significant rights and obligations of the operator and market participants; and
  • the Exchange Agreement will address the detail of market operation and the remainder of the rights and responsibilities.


The Draft Exchange Agreement will take effect as a multi-lateral contract between AEMO and market participants who elect to become members of the GTE. 

 

Draft Gas Supply Hug Exchange Agreement (version 4)

 

AEMO, in consultation with the Standing Council on Energy and Resources (SCER), is responsible for establishing the Exchange Agreement and monitoring
ongoing compliance.

 

Once implemented, the Draft Exchange Agreement will:

 

 

  • set out detailed provisions governing participation, trading and settlement for the GTE;
  • provide for trading and non-trading participants;
  • detail the trading products (including terms applicable to transactions), operational requirements, and processes to support transaction delivery, settlement and billing;
  • enable AEMO to impose prudential requirements for trading participants; and
  • set out events of default and other circumstances leading to suspension of access to the GTE or termination of membership.


Additionally, Schedule 1 of the Draft Exchange Agreement contains the draft Gas Supply Hub Membership Agreement (Membership Agreement). 

 

Parties seeking to participate in the GTE are required to become members. In order to be eligible to become (and remain) a member, a person must:

 

 

  • be a resident permanently established in Australia;
  • not be an externally-administered body corporate;
  • not be immune from liabilities incurred as a Member;
  • be capable of being sued in its own name; and
  • have offered to entered into and, remain a party to, the Membership Agreement.


If AEMO is satisfied that a person is eligible to become a member, than that person must enter into the Membership Agreement with AEMO. The Membership Agreement provides that, upon execution, the parties will become bound to the terms and conditions of the Exchange Agreement.


Once a member, a person must register as either a Trading Participant, Viewing Participant or a Reallocation Participant. AEMO will grant all members access to the Trading System for the purpose of viewing information about product trading however, only a Trading Participant will be granted access to the Trading System for the purpose of participating in exchange trading.


A person ceases to be a member when the Membership Agreement terminates.


What you need to do 


The Draft Exchange Agreement is the next stage in the evolution of Australia's upstream gas market. The Draft Exchange Agreement will not only establish the terms for participation in the GTE but it will also address the rights and responsibilities of participants in the GTE.


The Draft Exchange Agreement will be a contractually binding agreement between AEMO and the participants in the GTE. To that end, any party who may wish to participate in the GTE should review the Draft Exchange Agreement and consider whether they can comply with those terms and conditions and how the terms of the Draft Exchange Agreement may impact on their business.

 

  

For further information, please contact:

 

Paul Newman, Partner, Ashurst

paul.newman@ashurst.com

 

Ashurst Energy & Project Finance Practice Profile in Australia

 

Homegrown Energy & Project Finance Law Firms in Australia

 

 

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