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BHP and Esso to compete in marketing gas

BHP and Esso to compete in marketing gas

BHP Billiton and Esso Australia Resources have provided court enforceable undertakings to separately market their share of gas made under a joint venture.

BHP Billiton and Esso Australia Resources will separately market their share of gas produced under their Gippsland Basin joint venture for the first time in almost five decades, following an agreement with the consumer watchdog.

The two energy companies have been marketing gas from the offshore fields in Victoria's Gippsland Basin, to customers under a 50:50 joint venture since production started in 1969.

But on Monday, the Australian Competition and Consumer Commission said the pair had voluntarily provided court enforceable undertakings to separately market their respective share of gas from January 2019.

The decision was prompted by an ACCC investigation which found the joint arrangement was likely to have resulted in a substantial lessening of competition.

The investigation began on the back of the ACCC's East Coast Gas Inquiry in 2015, which identified a significant reduction in the level of competitive constraint in southeastern Australia.

The watchdog alleges the BHP-Esso joint venture's market power as a gas supplier in the southern states increased significantly from 2010 to 2015.

ACCC chairman Rod Sims said wholesale gas buyers in the region had become highly reliant on the GBJV - the largest gas producer in the southern states - as their primary supply source

"We believe that competition in this market was negatively affected by the elimination of independent rivalry between BHP and Esso," Mr Sims said in a statement on Monday.

Following the agreed separation, buyers will have the benefit of competing and potentially different offers from Esso and BHP, the ACCC said on Monday.

"We expect gas buyers will receive improved prices and contract terms for supply," Mr Sims said.

Esso said the two companies would cease marketing gas jointly at the end of 2018 and would work with customers to ensure a smooth transition to equity marketing arrangements.

"We're proud of the contribution that our Gippsland operations have made over the last five decades and we are committed to continuing to deliver reliable and affordable energy into the future," the company said in a statement.

BHP believes the voluntary move will allow it to leverage its significant experience in marketing oil and gas products globally and ends uncertainty for BHP and the market.

"GBJV (Gippsland Basin joint venture ) has reliably met the needs of the eastern Australia domestic gas market for around 50 years. However, the market has evolved significantly since the inception," BHP said in a statement.

"The decision to move to separate marketing recognises that evolution and the mature stage of asset life."

BHP shares were up 44 cents, or 1.59 per cent, at $28.14 at 1309 AEDT.

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