Dampier Bunbury Pipeline

 

www.dbp.net.au


The Dampier Bunbury Natural Gas Pipeline (Dampier Bunbury Pipeline) is Western Australia’s key gas transmission pipeline stretching almost 1,600 km and linking the gas fields located in the Carnarvon Basin off the Pilbara coast with population centres and industry in the south-west of the State.

The group of companies that owns and operates the Dampier Bunbury Pipeline trades under the name of DBP Transmission (DBP). 

Snapshot
Ownership Interest 100% (in aggregate)
Revenue ($ million) 382
EBITDA ($ million) 305
Regulatory reset date January 2021

DBP's latest results are contained in the latest Management Information Report.

Revenue streams

Almost all of DBP’s revenue is derived from contracted or regulated gas transportation tariffs, charged to wholesale customers for shipping gas along the Pipeline. DBP has entered into standard long-term transportation contracts (SSCs) with the major shippers using the Pipeline (other than Alcoa). Under the SSC contracts, 80% of the tariff is paid on a capacity reservation (take-or-pay) basis, with the remainder of the tariff dependent on each shipper’s actual throughput.

Alcoa, as the foundation shipper, has an evergreen contract with a charging arrangement that differs from those of other shippers.

Other revenue includes ancillary services to shippers such as short-term gas “park-and-loan” services, gas storage, imbalance charges and customer initiated capital works.

Competitive position

The Pipeline is an essential piece of energy infrastructure with no direct competition from other pipelines which also span its entire length and service the main markets it serves. There are substantial financial barriers to entry for a competing pipeline to be built. It has a strong track record of over 30 years of reliable operation.

Gas Volumes

Overall throughput was up 0.5% relative to the previous financial year. The pipeline from increasing gas demand in the Pilbara, with back haul volumes increasing 18.4% year on year.
 
Gas-fired electricity generation is progressively being used for shoulder and peaking generation requirements and as back-up when intermittent renewable capacity is unable to be dispatched. This has resulted in daily throughput volatility. However, electricity generators need to utilise their full contractual capacity when high demand periods coincide with coal or renewable generation outages and in periods of high electricity demand, especially on hot days when air-conditioning loads are higher. Therefore, while actual throughput may fluctuate, demand for gas capacity transportation remains strong. DBP's majority of take-or-pay tariff structure mitigates the actual impact on transportation revenues.

Reliability and Cost Control

During the year, DBP maintained its strong operating record, with system and compressor reliability approaching 100%. The DBP management team continues to demonstrate strong cost management, with operating costs 6.3% lower than the previous period, predominantly as a result of lower fuel gas usage. 

Re-contracting of SSCs

In mid 2014, DBP renegotiated the terms of its standard shipper contracts (SSC) with most of its firm full-haul shippers. The agreed terms establish the tariff payable by these shippers for a period that extends from July 2014 until December 2020. These shippers also agreed to extend the term of the renegotiated SSCs to between 2025 and 2033 (with two further 5 year extension options).

As a result, DBP has tariff certainty for more than 85% of its aggregate firm full haul contracted capacity (including Alcoa’s contract) until 2020. This has materially reduced DBP’s financial risk profile and increased the business’ contract coverage to beyond 2020. Importantly the renegotiated SSC tariffs are escalated at 100% of Perth CPI on an annual basis.

Regulation Update

The Western Australian gas regulatory regime requires that Access Arrangement revisions are lodged with the regulator, the Economic Regulatory Authority of Western Australia (ERA), for its approval at least every five years.

As DBP has renegotiated the SSCs for most of its contracted firm full haul capacity, the regulatory tariff established by the ERA will only apply to around 15% of DBP’s firm full haul contracted capacity through to 2020.
 
The regulator’s final determination for the DBNGP 2016-2020 Access Arrangement was published on 30 June 2016. The final decision was an improvement on the draft decision, with DBP awarded a 6.1% increase in total allowed regulatory revenue (real). DBP has applied to the Australian Competition Tribunal for a review of the final determination, with an outcome only expected in the first half of 2017.
 
Legislation has recently been tabled in the Western Australian State Parliament that, if enacted, will see the regulation of the DBNGP move to the national regulator, the Australian Energy Regulator, in time for DBP’s next regulatory decision, which is due to be effective on 1 January 2021. This will mean that all three of DUET’s regulated businesses will be regulated by the same regulator.

Operational overview

 
Year to 30 June 2016 Year to 30 June 2015
Contracted capacity (average TJ/day)
Full haul 737 756
Part haul 255 257
Back haul 204 197
Total 1,197 1,211

 
Year to 30 June 2016 Year to 30 June 2015
Throughput (PJ)
Full haul 233 233
Part haul 36 44
Back haul 63 54
Total 332 331
Occupational health and safety
Lost time injuries 0.0 4.4
Total recordable injuries 2.8 28.9
Environmental
Scope 1 CO2-e emissions n/a 265,017
 

Financial summary

$ million 
Year to 30 June 2016 Year to 30 June 2015
Transmission revenue 376 381
Total revenue 382 397
EBITDA 305 315
Regulated Asset Base 3,466 3,615

Credit ratings

Rating levels as at 1 September 2016:

S&P BBB- (stable)
Moody's Baa3 (stable)