ACCC: Gas shortages could cripple Australian manufacturing

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The Australian Competition and Consumer Commission (ACCC) has warned that soaring gas prices and the general shortage of gas supply on the east coast gas market are threatening to put many Australian manufacturers out of business.

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Speaking in Sydney at the 5th Annual Australia Domestic Gas Outlook Conference 2017, ACCC Chairman Rod Sims said that last year’s inquiry into the east coast gas market clearly showed the urgency for both new and more diverse sources of gas supply into the domestic market to help local manufacturers stay afloat.

“The outlook for gas supply is now even worse than it was a year ago; indeed, our worst fears are being realised,” Mr Sims said.

He said the scarcity of available gas on the east coast has seen prices increase well above historic levels, inflicting a serious blow to industrial gas users that have no alternatives to gas.

“The most important problem, however, perhaps the real crisis, is the difficulties faced by industrial companies who rely on gas as a feedstock or as an energy source,” Mr Sims said.

“Some are experiencing difficulties gaining supply; all are, or seem likely to, face huge price hikes that will perhaps permanently damage their businesses.”

He also pointed out there are a number of Australian manufacturers where gas accounts for as much as 40% of their costs, making it hard for them to invest and plan with such high gas prices and with considerable supply uncertainty.

“At worst, plants will close and jobs will be lost purely as a result of the current gas crisis,” Mr Sims warned.

“Australia often makes it hard to be involved in manufacturing. We are now making it extremely difficult, if not impossible, for some.”

Mr Sims said the 2016 Inquiry identified three main problems affecting east coast gas supply.

He said the “triple whammy” highlighted in the report include the introduction of LNG exports – which tripled the demand for gas – the plummeting oil prices not foreseen by the three LNG projects in Queensland, and the regulatory uncertainty and exploration moratoria which had significantly limited, or delayed, gas supply.

“Arising out of this triple whammy we now have a strange debate about the three Queensland LNG projects,” Mr Sims said.

“As our ACCC Inquiry pointed out Australia has enormous gas resources; gas availability is clearly not the issue. The Inquiry also pointed out that Australia has and will benefit enormously from the three large LNG projects in Queensland. These three projects also saw gas resources developed that otherwise would not have been.”

He said the only accusation that could be levelled at the three LNG producers was that they fell into the usual ‘commodity project trap’ of assuming then-high $100 plus oil prices would continue.

“The three LNG producers, however, could not have foreseen that after their investment decisions were made east coast onshore gas exploration and development would be largely prevented,” Mr Sims continued.

“I doubt anyone in the industry expected Victoria to ban all onshore gas exploration and production which has stopped even conventional gas projects; nor could they have foreseen the delays and uncertainty over projects in NSW and the NT.”