Santos Direct Pty Ltd, one of Australia’s largest natural gas producers, has been ordered to pay a $2.75 million penalty by the Federal Court for widespread breaches of record-keeping rules in the nation’s gas market.

In a judgment handed down on 4 June 2024, Justice Neskovcin found that between March 2019 and June 2021, Santos failed to keep required records on 4,701 occasions relating to the Day Ahead Auction for gas pipeline capacity across six facilities.

The Day Ahead Auction, introduced in 2019, is designed to improve competition and efficiency in the gas market by allowing unused contracted pipeline capacity to be traded.

Accurate record-keeping is critical for the Australian Energy Regulator (AER) to monitor compliance and investigate potential breaches, such as making false or misleading nominations.

Justice Neskovcin stated the penalty “should operate as a deterrent” and highlighted the importance of record keeping “in protecting the proper functioning of the capacity auction”.

AER Chair Clare Savage welcomed the Court’s decision, emphasising the Day Ahead Auction’s vital role in facilitating gas flows between markets.

“It is crucial that trust and confidence in the Day Ahead Auction is maintained for it to continue to deliver benefits to consumers,” Savage said.

In addition to the $2.75 million fine, the Court ordered an independent review of Santos’ processes to ensure future compliance.

Santos had admitted to the breaches, and the AER and the company had filed agreed facts and joint submissions on penalty prior to the judgment.

The Day Ahead Auction has been hailed as a key reform to improve transparency and competition in Australia’s gas markets.