Australia seeks feedback on plan to develop its own 'Henry Hub'

Australia's federal government is seeking feedback from stakeholders on its plan to make the country's domestic east coast Wallumbilla Gas Supply Hub into an Australian version of the US' giant Henry Hub.

"Our vision is for Wallumbilla to become the Henry Hub of Australia -- the key gas trading point. To do this, we need to work with industry to reform the market to increase the number and volume of gas trades at Wallumbilla," minister for industry, energy and emissions reduction Angus Taylor said in a statement Nov. 17.

The idea of replicating the US hub in Australia was first floated by the Australian government in September last year as part of its planned "gas-fired recovery" from the economic impact of the COVID-19 pandemic.

Given the dramatic difference in size between the US hub and the Australian market, it's unclear whether replicating the Henry Hub is realistic given the US has many thousands of gas producers. The Australian government's consultation paper noted that the number of participants on the Australian hub increased to a monthly average of 15 in 2020, up from 13 in 2019 and 12 in 2018.

"At Wallumbilla, the major LNG exporters represent the vast majority of buy and sell trades at the hub, with a relatively minor contribution from other supplies and users. The lack of trading outside of LNG exporters in the hub can discourage small parties from openly trading on the GSH, as there is a perception they will not secure competitive prices," the consultation paper notes.

"The low number of participants also discourages further participants from joining," it added.

Taylor's office said in the statement that current barriers which impede liquidity at Wallumbilla could be overcome through measures such as anonymized trading, a market maker regime, and the establishment of a virtual trading hub.

"We understand that unlocking more supply and establishing well-functioning markets is fundamental to increasing competition and driving down gas prices. This is a key part of the gas-fired recovery," Taylor said.

Responses to the consultation paper are due Dec. 24 and the energy minister is to consider a roadmap in March next year.