6427.0.55.009 - Information Paper: Update on the Development of an Oil and Gas Extraction Producer Price Index, June 2016  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 23/06/2016  First Issue
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SCOPE AND COVERAGE

Submissions sought clarification of the scope and coverage of the proposed price index, including the appropriate price to measure, sample selection and sample size, level of geographic disaggregation, and the length of a historical time-series.

The proposed price index is designed to measure price change of all market transactions. The dominant mechanism in the market for the sale of natural gas is currently medium to long-term bilateral contracts, and the index will include pricing from a sample of contracts, appropriately weighted to represent how much natural gas is sold through these arrangements. The index will also include natural gas prices received by gas producers through other mechanisms, such as short-term trades and gas supply hubs, and as these become more prominent their weight in the overall price index will increase. The ABS has a sample review and maintenance process to capture these changes in a timely manner.

The proposed price index provides coverage of IOPC 07000030 Natural gas in its gaseous state, as part of ANZSIC Class 0700 Oil and gas extraction. It is considered that this classification best addresses the initial requirements from the AEMC and adheres to ABS statistical frameworks. The activity under this classification is gas production, so the price index proposal seeks to collect pricing data from gas producers only.

Further stages of the supply chain fall under different industry classifications. Gas transport price change is currently collected under ANZSIC Class 5021 Pipeline transport. Prices in gas supply will be measured under ANZSIC Class 2700 Gas supply.

Feedback was received that a geographic split between the east and west coast markets is critical for the index to be relevant to industry. It was also suggested that a further disaggregation to measure the dynamics within the east coast market between north and south needs to be considered, as well as an index for the Northern Territory market. The ABS will design the index structure so that, at a minimum, east and west coast indexes are developed. Further disaggregation of the index will be considered in the future. The level of dissemination is dependent upon ABS disclosure and provider confidentiality conditions being met. It will not be possible to make an assessment on this until the index is compiled in the final stages of the development process.