MIM HOLDINGS LIMITED

(ABN 69 009 814 019)

SUBMISSION ON THE PROPOSED ACCESS ARRANGEMENT 
FOR THE CARPENTARIA GAS PIPELINE

29 JANUARY 2001

BACKGROUND

MIM Holdings Limited (MIM) is a Foundation Buyer  which has contracted to purchase approximately 51% of the current capacity of the pipeline (i.e. the free flow capacity) at the Mica Creek Delivery Point from its Shipper, the South West Queensland Gas Producers, an unincorporated joint venture. The Operator of this joint venture is Santos Ltd. The Shipper in turn has a Gas Transportation Agreement (GTA) with the Carpentaria Gas Pipeline Joint Venture (CGPJV)

Approximately 96% of MIM’s gas is used for power generation at the Mica Creek Power Station (100% owned by CS Energy ) with the remaining 4% used as process gas for MIM’s mine site.

Whilst not having a direct contractual relationship with the CGPJV, MIM is faced with  potential and actual  “cost flow through” provisions  in our gas supply arrangements with the Shipper , which are costs that originate  directly from provisions under the GTA between the Shipper and the CGPJV. It should be noted that the inclusion of these cost flow through provisions in our gas supply arrangements ,which essentially reflect the provisions in the Shipper’s GTA, was agreed between MIM, the Shipper and CGPJV at the time the North West Queensland gas sales arrangements were negotiated.

MIM is aware  that  under s.58 of the Gas Pipelines Access (Queensland) Act 1998, which came into effect on 19 May 2000, the Reference Tariffs and Reference Tariff Policy for the CGP Access Arrangement have been determined by the Queensland Minister and cannot be reviewed in this process.

If , however, the Queensland Third Party Access Regime for Natural Gas Pipelines (“the Queensland Regime”) contained in this legislation is not certified as an “effective” access regime under Part III A of the Trade Practices Act 1974 , MIM  would like to take that  opportunity to submit further comments to the Commission.

At this juncture however, MIM will restrict its comments to the issues raised in Chapter 5 – “Ballera to Mt Isa Pipeline” (Parts 5.2.2 to 5.2.8) of the ACCC’s Issues Paper. MIM however,does support in principle, the  submissions made by other Shippers, in particular BHP and Pasminco Century Mine Limited (PCML).

COMMENTS ON SECTIONS 5.2.2 TO 5.2.8 

Section 5.2.2 Information Disclosure

As a general observation the information disclosed by the CGPJV in their Access Arrangement Information is insufficient to enable Users and Prospective Users to understand the derivation of the elements in the proposed Access Arrangement and to form an opinion as to the compliance of the Access Arrangement with the provisions of the National Gas Code. 

In particular, there is concern that the Queensland Government’s earlier approval of the Tariff arrangement results in an opportunity for the CGPJV to supply Access Arrangement Information which  lack transparency and falls short of the requirements under Section 2.7 ( Attachment A) of the National Gas Code. Of the Six(6) categories in Attachment A , the CGPJV has only provided information on Category 5 : Information Regarding System Capacity & Volume Assumptions. Given that the Queensland Government has approved these Tariff arrangements until 2023, it is not unreasonable for the CGPV to be required to make disclosures on all six (6) categories. 

Section 5.2.3 Services Policy

MIM believes that in the current more dynamic marketplace for gas, it is inappropriate for there to be only a single  Reference Service, being forward haul  up to 175TJ’s of Capacity. The other Services that should be considered include:

•	Pressure Service: The Access arrangements should declare  a mechanism  which sets a tariff for this Service. The CGPJV’s obligations to expand the pipeline up to 175 TJ’s (ie The original timing of the installation of each Compressor) which is already built in to the Reference Tariff, should be considered when  costing this Service.

•	 Interruptible Service: This Service is widely available on most pipelines and a transparent Interruptible Tariff should be made available.

•	Backhaul Service: With the advent of alternate gas supplies from Timor Sea and PNG, there is a  real possibility that this Service will be commonly used. In the future, accordingly a tariff should be published. 

Section 5.2.4 Terms and Conditions

MIM believes that the Terms and Conditions are  adequately described for a prospective User to be sufficiently well informed before making an access request.

However, MIM is concerned at the inconsistency between some of these Terms and Conditions and the proposed Access Arrangement submitted by the CGPJV. Specifically, the inconsistency between Schedule A clause 1.3.5 of the Terms and Conditions (Tariff Arrangement approved by Minister) and clause 8.2 of the Access Arrangement (Expansion of Capacity up to 175 TJ/Day). We will expand on this in our comments on Section 5.2.7 Extensions/Expansions Policy.

Section 5.2.5 Trading Policy

MIM believes that a User should be able to transfer contracted capacity at a Receipt Point or Delivery Point without CGPJV’s consent as long as the terms are unaltered in that assignment. It is unreasonable to have a requirement that consent may be withheld on reasonable commercial grounds without prescribing any objective criteria for those grounds.  Consent may only be withheld by CGPJV for  proven technical reasons and/or if the assignee does not display the technical or financial capability in assuming the User’s obligations.

Section 5.2.6 Queuing Policy

MIM believes that as there is only one Reference Service, clause 7.4 Dot point 3 in CGPJV’s proposed Access Arrangement is too restrictive in the priority of  a Reference Service over a Negotiated Service. There should be a discretionary element prescribed in this clause 7.4, which addresses the relative merits of each requested Service. eg. An Interruptible Service may be essential to fulfill the short term/urgent requirements of a prospective User and should, depending on the circumstances , be considered ahead of a Reference Service (for the same Capacity) as the Reference Service  is typically a stable 15 year term. Agreement  (Due to the 2% increase in the Base Tariff Rate  for every year that the term is below 15 years) 

Section 5.2.7 Extensions /Expansion Policy

MIM and PCML , both use  the Mica Creek Delivery Point for the transmission of our gas to the Mica Creek Power Station.

Although, MIM is not a Shipper, through our gas supply arrangements(See Background Section), we have the same exposures as Shipper PCML to  the problems associated with CGPJV’s reluctance to install the first compressor on the pipeline. This is despite a general  view amongst the current users of the pipeline that the contracted capacity is now  at or greater than pipeline capacity.

Accordingly, MIM wishes to reiterate  PCML’s submission on this Section  which is outlined below:  

MIM’s main concern relates to the expansion of the capacity of the pipeline up to 175 TJ/day.  Section 1.3.5 of the Approved Tariff Arrangement states that:

"The Service Provider is not entitled to recover from Users by way of charges:

a)	the cost of constructing any capital improvement to the pipeline to increase the capacity of the pipeline up to 175 TJ/day; or

b)	the cost of compressor fuel used in the operation of the pipeline except where gas is delivered into the pipeline by or on behalf of the user at a pressure of less than 14,800 kPa."

The clear implication of the approved Tariff Arrangement, and the Access Principles on which the Approved Tariff Arrangement is based, is that the CGPJV will automatically expand the capacity of the pipeline, in increments and by the addition of compression, up to 175 TJ/day as and when that capacity is required.

In MIM’s view it is unclear that the CGPJV has discharged its obligation to expand the capacity of the pipeline by the addition of the first compressor.  Moreover, it appears that pursuant to Section 8.2 of the proposed Access Arrangement the CGPJV is seeking to substantially qualify its obligation under the approved Tariff Arrangement.

MIM submits that the second dot point in Section 8.2 of the proposed Access Arrangement should be deleted and replaced with the following:

"CGPJV will undertake on expansion of capacity of the Pipeline up to a maximum capacity of 175 TJ/day on the request of a User or Prospective User if that User or Prospective User commits, or has committed, to the use of capacity in excess of the current capacity of the pipeline at the Reference Tariff."

MIM is concerned that the current capacity of the pipeline does not appear to be sufficient to meet the contracted pipeline capacity of 96.4 TJ/day.  The following incidents have cause for concern:

•	on a number of occasions distillate has had to be used at the MCPS at significant cost to MIM,PCML and  and other power offtakers although total deliveries from the pipeline appear to have been less than 96 TJ/day; 

•	the failure to receive gas at Ballera within contract limits has led to a reduction in individual shipper's line pack and the threat of curtailment of deliveries; and

•	at least one shipper appears to have incurred costs due to the inability of the pipeline to receive gas at Ballera within contract limits.

It seems that in the setting of the Reference Tariff and the 175 TJ/day limit that some account was taken of the need for, and the cost of, compression.  It is unsatisfactory that such an important issue as the precise terms on which the CGPJV committed to compression in discussions with the Queensland Government should be shrouded in obscurity.

It is also most unsatisfactory that the approved Tariff Arrangement provides for a minimum delivery pressure of 2,000 kPa when the major Delivery Point on the pipeline, where 67% of the capacity is disposed, requires a minimum pressure of 3,000 kPa.  This is particularly so as the capacity of the pipeline increases by only 2 TJ/day if the pressure at the MCPS Delivery Point falls from 3,000 kPa to 2,000 kPa.  This gives scope for considerable confusion and obfuscation when the pipeline is close to its maximum capacity.

Section 5.2.8 Term and Review

In MIM’s view, the current Revisions Commencement Date of 1 May 2023 set by the Queensland Government for the Tariff Arrangements is clearly inappropriate. We note that once the Non-tariff elements of the Access arrangement are finalised, the subject of this review, that they too cannot be reviewed until 2023. 

As a minimum, MIM would suggest  there be a Five (5) year review or a “major event trigger”, whichever happens earlier.

A major event trigger could be :

•	A new Receipt Point on the CGP
•	A significant “Negotiated service’. eg: Pressure Service, Backhaul arrangement.
•	Interconnection with a covered pipeline

•	Aggregate MDQ’s contracted in the pipeline reach 140TJ/Day (80%of 175TJ/day) – This would provide some lead time for the Users to canvass and discuss the new Access Arrangements to be submitted by the CGPJV to cover expansions beyond 175TJ/Day. To this end ,clause 8.3 of the CGPJV’s proposed Access Arrangements should be amended to give the Regulator the discretion as to the treatment of the expansion as a Covered pipeline or otherwise. Furthermore it would be preferable that Dot point 2 be deleted and that in accordance with Dot Point 3 that CGPJV submit revisions to the Access Arrangement pursuant to Section 2.28 of the National Gas Code. 

•	.