Gas prices in Victoria may soon fall after BHP and Esso ended a 48-year-old gas marketing joint venture in Victoria's Gippsland Basin amid pressure from the competition watchdog.
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The companies on Monday said they had agreed to sell their gas from the region separately from 2019.
In 2015, the Australian Competition and Consumer Commission (ACCC) identified changing market conditions that it believed reduced the level of gas contract competition and could have a flow-on effect to gas prices.
It raised concern last year about the tight grip the Gippsland Basin joint venture, the biggest producer in the country's southern states, had on the market. The ACCC flagged it might force the firms to sell their gas separately.
It could have taken Esso's parent ExxonMobil and BHP to court had they not agreed to break up the marketing joint venture.
"The ACCC was concerned that the joint marketing arrangements were likely to have resulted in a substantial lessening of competition in the market for the supply of gas to buyers in the southern states," ACCC chairman Rod Sims said.
"We believe that competition in this market was negatively affected by the elimination of independent rivalry between BHP and Esso."
The companies had long argued that joint marketing actually saved costs. ExxonMobil had warned in April 2016 that any unwinding of joint marketing "could make it more difficult to invest and bring on new supplies in Gippsland".
A BHP spokesman stressed that the agreement with the ACCC to move to separate marketing for its share of the joint venture was voluntary.
Until the marketing split occurred, both companies would continue to meet existing contractual commitments, an Esso spokesman said.
Mr Sims welcomed the split on Monday, saying it would help relieve price pressures in the market.
"The ACCC's intervention should improve the competitive landscape for gas buyers on the east coast. We expect gas buyers will receive improved prices and contract terms for supply," Mr Sims said.
"It is vital to commercial and industrial customers that this sector becomes more competitive."
The ACCC is also looking to drive down energy prices by targeting the gas pipelines market.
"We want to regulate the pipeline monopoly," Mr Sims told Fairfax Media.
"We can't break it up as the situation is what it is, but there are actions we can take."
He said these actions would have a direct impact on gas prices and better results for gas users.
"In two to three years, pipeline prices will come down, and we'll see lower flow-on prices in Victoria and NSW," Mr Sims said.
Cole Latimer and Reuters
