13 April 2015

Manufacturing Australia releases action plan for gas market reform

Australia’s largest manufacturers have released a market reform plan they say could restore competition and confidence to the domestic gas market and help to avoid widespread manufacturing job losses.

The 13 point plan, launched today by Manufacturing Australia Chairman, Mark Chellew, urges joint action by Federal, State and Territory governments and industry, and says gas market reform should focus on four key goals: establishing transparent and functional gas markets; securing domestic and export supply, developing appropriate infrastructure and providing incentives for new production.

Mr Chellew described the gas supply and price challenges as a “severe threat” to domestic manufacturing, and warned that up to 83,000 direct manufacturing jobs could be lost if market reforms are not fast tracked to restore confidence amongst industrial gas users.

“The Energy White Paper has the right vision of a gas market with diverse suppliers, additional supply, appropriate infrastructure and competitive, transparent, trading markets,” said Mr Chellew.

“But we are a very long way from that ideal now and there is a lot of work to be done if the Australian gas market is going to enable long term manufacturing investment.”

The action plan outlines a highly dysfunctional gas market that has rapidly consolidated and transformed with the establishment of an export Liquefied Natural Gas industry.

“Just a handful of economic interests now control the vast majority of Australia's current gas reserves, while regulatory barriers, infrastructure constraints and the lack of transparent markets and trading hubs prevent new gas supply, and new suppliers, from entering the market,” he said.

Amongst the recommendations are calls to establish functional, transparent, trading hubs for gas, fast-track gas infrastructure like the proposed Northern Territory pipeline, introduce “use it or lose it” policies to prevent gas being withheld from the market, and for governments to incentivise and stimulate investment in new gas production to get more competitors into the market.

Mr Chellew said last week’s announcement that the Australian Competition and Consumer Commission (ACCC) will examine competition in the Australian gas market is a very welcome start, but reforms must move quickly.

“None of this is easy. None of it is a silver bullet. But if we continue on the path we’re on Australia will lose much of our gas intensive manufacturing industries, and we’re not likely to get them back.”

You can view the gas market solutions paper here.