29 March 2012
Put brake on gas exports: manufacturers
The Australian Financial Review
Manufacturers of chemical and industrial products have called on the federal government to overhaul its energy policy to ensure Australia keeps more of its abundant gas resources to feed an increasingly sophisticated manufacturing sector.
The call came as Manufacturing Australia pushed to sideline unions to reduce costs.
Speaking at the launch in Sydney yesterday of the Future of Manufacturing in Australia Forum, Incitec Pivot chief executive James Fazzino said the government could also put downward pressure on electricity costs.
Australia was wasting a huge opportunity to benefit from gas by exporting most of the resource at the low end of value chain, he said.
The government could force some projects to keep a proportion of the gas onshore, he said. "They can say for the next tranche of reservations, we're actually going to reserve 20 per cent for onshore processing.
"The government can also fast-track some of the new sources of gas, for example, shale gas, underground coal gas."
Incitec Pivot wants to invest $700 million in an ammonia plant either in Australia or the United States, but the gas price in Australia makes it less attractive.
"If you take gas and you export it via LNG, you create about three times value-add. If you take that same molecule of gas and produce say an explosive emulsion, one of our high-tech explosives, you increase its value by 20 times," he said.
"Everyone wins – the government gets the tax, local communities benefit through employment and the companies benefit through dividends."
Dow Chemical chief executive and chairman Andrew Liveris said it was a "travesty" that overseas gas companies were dictating gas prices here.
"This is not a free market, this is an unfair market," he said.
"The manufacturing companies here will create value-add products and diversify away exposure from the commodities cycle."
Energy and resource allocation is part of Manufacturing Australia's four pillar reform program, which includes industrial relations, anti-dumping and regulation.
Manufacturing Australia's inaugural executive chairman Dick Warburton said Australian manufacturing was fighting for its existence on multiple fronts. "Manufacturing is simply too important to the Australian economy, and the nation, to be allowed to continue its decline."
But, he said, Manufacturing Australia, which includes Amcor, Boral, Capral, Rheem, Incitec Pivot, BlueScope Steel and CSR, was not looking for government handouts. Rather, it was seeking policy and industry reform.
"Reviving Australian manufacturing requires a strong nationwide cultural reform here and now, to stop the erosion of a once great industry that remains the backbone of Australia's future competitiveness, trade outlook and prosperity," he said.
Manufacturing Australia wants legislation removed that demands third-party employee representation, which uses up a disproportionate amount of time, money and resources to administer and comply.
The focus instead needs to be on the direct relationship between employees and employers. "This is the most effective way to build understanding of customer, employee and business needs at the local business unit level. Presently, the reverse is the case in Australia," Mr Warburton said.
Australia's anti-dumping regulations must be better supported and resourced to ensure their effectiveness, he said, highlighting that local manufacturers cannot continue to withstand unfair trade that leads to jobs losses.
While Manufacturing Australia's members understood the importance of regulation, he said, it was some times applied inefficiently and inconsistently.
Changes frequently occur without proper consultation and sometimes in conflict with other regulations, he added. Some aspects of regulation should be rolled back, particularly where it does not add any economic value or competitive advantage.
"Rheem has to deal with no less than 40 regulatory bodies to manufacture and market hot water heaters, leading to the absurd scenario where one authority insists that Rheem invest in efficiency improvements to a product that another authority has declared will no longer be eligible for sale in a decade," he said.
Finally, he said the government must maximise the entire energy value-chain through policy measures.
"Australia is squandering one of its key competitive manufacturing advantages through short- sighted energy policy," he said.
"We have abundant gas but our lack of vision means it will be processed through giant refrigerators to send overseas for others to value-add."