Gas market expansion tariff is no windfall

Brian Robins's article on the east coast gas transmission market ("Gas market set for growth and overhaul", AFR, March 8) highlights the dynamic nature of the gas industry as the three Gladstone LNG projects come online. However, Robins does not fully explore the pipeline industry's response to an evolving market.

I am the managing director of APA Group, Australia's largest gas infrastructure business. In recent years we have invested and innovated to offer unprecedented flexibility for new and existing customers. By creating one interconnected network of gas pipelines we now operate our network of pipelines as one system. We have increased pipeline capacity, improved gas storage options and introduced bidirectional flow on our pipelines. The introduction of a platform for capacity-trading has delivered greater flexibility and access to existing unused capacity to both existing and new customers as well as increased transparency to potential customers, providing information about available capacity and daily utilisation rates.

We are willing to build new pipelines or upgrade capacity on existing pipelines as long as there is demand to utilise this capacity. Robins is correct that an "expansion tariff" is then applied and charged to any customer taking up the new capacity. The expansion tariff, which is sometimes, but not always, in line with existing tariffs, is calculated to provide an appropriate return to APA on the capital invested in the expansion – there is no windfall for APA.

Our demand-driven approach to investment means, in the long-term, pipeline capacity expansions are advantageous for all stakeholders – shippers, end customers, and pipeline owners.

Mick McCormack

APA Group

Sydney, NSW