MELBOURNE, July 1 (Reuters) - Australia's competition watchdog on Thursday proposed introducing an oil index to track gas export prices, looking to improve price transparency for big local gas buyers when negotiating longer-term contracts with producers.
The Australian Competition and Consumer Commission (ACCC) has been looking for ways to boost price discovery for east coast gas buyers who have complained about the market power of the major gas producers, who export most of their gas as liquefied natural gas (LNG) from three plants in Queensland.
In 2018 the ACCC launched an LNG netback price tracker looking two years ahead, based on the spot LNG price in Japan, minus the costs of liquefaction, transport costs to Queensland export terminals and shipping costs to Japan.
The LNG netback price was meant to help gas buyers understand at what price producers would be indifferent between exporting gas or selling it into the domestic market.
However sellers have criticised the spot LNG netback price as irrelevant as most LNG is sold on long-term oil-linked contracts, and the two-year tracker is seen as unhelpful as most buyers want longer term contracts.
So the ACCC is proposing to publish LNG netback prices for five years linked to forward oil prices, alongside its existing tracker.
"Publishing longer-term forward LNG netback prices will add transparency to the market and address an existing information asymmetry between C&I (commercial and industrial) users and those suppliers who already consider oil-linked LNG prices when forming views about longer-term domestic prices," the ACCC said in a draft decision on Thursday.
A key challenge would be to work out the appropriate percentage - or "slope" - of the oil price to determine the LNG price, the ACCC said. It plans to use an industry consultant to estimate an appropriate slope at least once a year.
A final decision is due in September.
Reporting by Sonali Paul; Editing by Simon Cameron-Moore
Our Standards: The Thomson Reuters Trust Principles.
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