NATURAL GAS MARKETING IN AUSTRALIA

Abstract

Up to the present there has been insufficient experience in marketing natural gas in Australia to give precise opinions based upon experience. This paper therefore deals mainly with the problems to be encountered and expected methods of dealing with them.

Since natural gas was first discovered, frequent comparisons have been drawn with the American industry's position and it is often suggested that this should form the pattern for Australian development. I would question whether the parallel exists to any great degree as the American industry was established and gained a firm foundation from cheap surplus supply of natural gas.

Australia has begun marketing natural gas under much more difficult circumstances. It is being given no opportunity of cheap raw material to build up a load and must fight for much of its business on very narrow cost margin differentials. The American gas distributing industry was able to quickly write off conversion costs and rehabilitate its operation, placing it in a strong position for future marketing activities.

Gas Purchase contracts already negotiated are a compromise of conflicting interests. Producers desire maximum well head prices, pipeliners satisfactory margins and distributors an adequate return on investment. Large volume sales are necessary for economic operation but frequently are only obtainable at rates very close to city gate prices.

Large special type users, such as power houses or fertilizer plants, can provide base business but due to their special nature, are not considered in detail.

Industry generally, is where the major volume sales will be obtained. The first requirement is the construction of tariffs to attract this business but which will not conflict either with existing revenue or with the various types of customers. A new approach to tariffs and special contracts is required by the distributor to meet the flexible nature of competition from the oil industry.

The gas marketer must maximize the advantages of natural gas as a fuel. It is not necessary merely to have gas available at attractive prices. Australian industry is extremely conservative and potential users may need education on the true importance of fuel in their operation. Many look at the cost of the fuel only, without realising the other advantages which can be gained from the introduction of this more refined material. Even after supply has commenced, it has been found necessary to spend considerable time with customers to show how the new fuel may be used to the greatest advantage and economy.

The third market area lies in domestic and commercial business. The existing traditional market of cooking and water and space heating will remain the basic load and the main requirement is to convince householders of the real value of natural gas. Domestic business is strongly influenced by personal choice and prestige value while sometimes ignoring cost and utility. Other marginal domestic markets will develop, but whilst valuable, are unlikely to provide a significant load.

Commercial sales are a market for which natural gas should obtain a very high level of saturation. Its advantages in utilisation and cost are far ahead of any competitive fuel. This market however will need to be sold in a positive way.

After the first market developments have taken place, it is expected that gas distributors will consider extending gas purchase contracts. Negotiations should take place under much more realistic conditions, as experience will exist to determine what is a fair basis of purchase to allow further market development to take place.