AEMO Detailed Design
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A supply hub at Wallumbilla
Wallumbilla plays a key role as a major transit centre for natural gas in Eastern Australia, with existing trade and significant infrastructure connecting multiple markets. The Roma-Brisbane Pipeline (RBP), Queensland Gas Pipeline (QGP) and the South West Queensland Pipeline (SWQP) connect at Wallumbilla, providing a transit point between markets in Queensland, South Australia, NSW and Victoria.
A transparent price and trading point at Wallumbilla would help provide a basis for valuing and transacting gas within a day. As the Australian Government noted in its December 2011 draft Energy White Paper, a supply hub has the potential to balance gas supplies at least cost, enabling market participants to better manage the financial risk associated with exposure to variable gas prices. It would also increase overall participation in gas markets by attracting large users (such as LNG plants, industrial users and gas-powered generators).
The brokerage model
The brokerage hub would facilitate the matching and clearing of trades between buyers and sellers of gas at three pipeline receipt point locations through a web-based exchange platform. These receipt point locations would be at the RBP, QGP and SWQP. At market start, AEMO will offer spot and forward-dated products participants to trade. The spot transactions will include a core ‘day-ahead’ product and a ‘balance-of-day’. These are a ‘day-ahead’ product and a ‘balance-of-day’ product. The standard delivery period (term) for the day-ahead product is a single gas day, while the ‘balance-of-day’ product is for the delivery of gas from the transaction time to the end of the gas day. The ‘balance-of-day’ product would enable parties to adjust their portfolio closer to real-time and to manage imbalances within the gas day.
At Wallumbilla, existing buyers of gas are entitled to take gas away from the hub on a transmission pipeline for which they have an existing Gas Transportation Agreement (GTA). The diversity of contract positions and the number of participants at Wallumbilla creates a natural point of trade. The brokerage model is designed to be implemented at a major supply centre such as Wallumbilla.
A trading product would be created at the RBP, QGP and SWQP trading locations (nodes) where title of gas would transfer at the delivery point specified for each product. Similarly, shippers could trade gas between each node with the relevant access to capacity, compression and services that enable transit of gas between trading nodes.
Implementation of the brokerage model avoids the need to change infrastructure, operations or contracts. Trading liquidity under the brokerage model can be enhanced through the development and coordination of hub services once the hub is established.
Diagram 1 – High level overview of the exchange operation
Detailed Design for a Gas Supply Hub at Wallumbilla01 Feb 2013 | filesize: 1.3 mb (.pdf)