Gas Market in Australia: Structure, Domestic Market, Supply, Players, and Sustainable Procurement Practices of AGL

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Description of the gas market in Australia:-
The structure of the Australian gas industry is quite complex as near about 150 gas
companies are operating there. It can be classified on the basis of gas types, operational
segments, deposit basins or groups of players can be grouped into three main types:
 International Majors (multinational companies)
 Australian Majors (domestic companies with market capitalisation)
 Juniors (small cap companies with little market or production share).
Though most of the gas players are junior, still the industry is dominated by major companies in
every segment (Qiu et al.,2015).
Domestic gas market:- Based on gas basin and pipelines that supply them, the domestic gas
market in divided into three separate regions:-
 Eastern Gas Region:-The gas basins supplier of this market contain about one third of
Australia’s gas reserves.
 Western Gas Region:-The gas basins supplier of this market contain aboutone-half of
Australia’s gas reserves. This market focuses on exports as well as supplies domestic
consumption.
 Northern Gas Region:-This market is Australia’s smallest producer and its basin provide
gas for export as well as domestic consumption in Northern Territory.
The gas markets in Australia are changing rapidly and there must be a balance between
the supply and demand to ensure that Australian consumers and industry can access affordable
gas anytime and anywhere. At present, the east coast gas markets are integrated and natural gas
flows become more active to move the gas across the network to where it is needed (Cassidy &
Kosev, 2015).

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Gas Supply:- There are genuine impacts on the business and consumers in domestic markets due
to the increasing gas demand pressure on both gas supply and prices. The key elements of gas
supply industry are gas producers that generate gas, gas retailers that buy as well as sell gas and
gas distributors that carry and bring gas to the end users through management of distribution
networks. The industry growth is mainly due to increasing gas prices and as use by major
markets.Companies retail gas to consumers and businesses. Companies also distribute natural
gas, manufactured town gas, Liquefied Petroleum Gas (LPG), Liquefied Natural Gas (LNG),
Coal Seam Gas (CSG),Underground Goal Gasification (UCG) to end users through gas
distribution main. The industry excludes the operation of gas transmission pipelines, which
transport gas from gas production facilities to gas distribution mains (Austvik, 2016).
One major player in gas retailing is AGL Energy Limited (AGL). AGL Energy Limited
(AGL) is one of the leading integrated energy company in Australia, which generates and sells
both gas and electricity for residential as well as commercial use (Corones, 2014).
Gas for private consumers:-
Gas is an efficient and low emission energy source for Australian customers. In their
energy choices, consumers consider factors such as cost-effectiveness, appliances, home,
lifestyle, environmental performance. Compared to other energy service, gas remains price
competitive and is delivered to Australian homes at a cost which can be up to 80% lower than
mains electricity on an equivalent energy basis. The cost of gas to a customer reflects wholesale,
network and retail costs. There have been increases to the wholesale cost of gas on the East
Coast which reflects a combination of regulatory restrictions on gas production, increases in
production costs and linkages to international markets. Nevertheless, the wholesale cost only
represents about 20 to 25 % of the total costs to typical residential customers (Higgins, Dibden,

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& Cocklin, 2015). A customer’s gas bill will be more heavily influenced by network costs, which
contribute around half of the average residential bill. Australian network operators are working
hard to reduce network charges. In New South Wales over the next five years, Jemena’s network
customers will see an average saving of $118 per year due to a 34% reduction in network
charges. As a result of stable or falling distribution network costs and increased retail
competition, the outlook for residential gas prices remains competitive, even with rising
wholesale prices (Simshauser & Nelson, 2015).
Gas for business customer:-
Australia’s distribution gas networks provide approximately 133,000 commercial and industrial
customers with an essential input to growth, job creation and environmental performance. A
quarter of Australia’s energy used comes from gas. The domestic gas sector was estimated to
contribute almost $3 billion to value added GDP in 2013. Natural gas is widely used in
commercial premises as an efficient source of heating and cooling. Gas is also a critical input to
industrial operations including the manufacturing sector which employs about one million
Australians. It is commonly used to generate electricity, heat and steam for production including
alumina refining, food manufacturing, beverage and grocery production. Gas is irreplaceable in
the production of most fertilisers, cleaners, polymers and refrigerants, making it a crucial
feedstock for industry (Haghkhah, 2016). Significant innovation in gas uses and technology are
driving efficiency, economic growth and lower greenhouse gas intensity in industrial production.
Sustainable procurement practices for AGL:-
Sustainable procurement is a solution to integrate environmental and social
considerations in all steps of procurement process, in order to reduce impacts on human health,
environment, and human rights (Roman, 2017). The inclusion of sustainability considerations