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19 December 2018

Manufacturing Australia: Statement on ACCC gas market report



More supply, more suppliers, and more domestic-only tenements will be needed needed to solve Australia’s East Coast gas crisis and underpin future investment in Australian manufacturing.

Manufacturing Australia CEO, Ben Eade, said yesterday’s ACCC gas market report makes plain that tight gas supply, lack of competition between producers and high domestic prices linked to Asian LNG prices are a growing threat to many Australian manufacturing industries.

“In the ACCC’s words, while Australia’s East Coast gas producers are enjoying significant margins from “prices well above the estimated costs of gas production”, their commercial and industrial customers are “facing very challenging long-term investment decisions, with some increasingly likely to relocate or close their operations.”

“Clearly, we need more gas production – especially in Southern States – but that alone won’t be sufficient”

“We also need more suppliers competing in the domestic gas market, which will require policy support and incentives for new players. And we need more domestic only gas tenements, under the blueprint now established by the Queensland Government.”

The ACCC estimates quantity-weighted average gas production costs in Eastern Australia range from $3.76/GJ to $4.91/GJ. Meanwhile it reports that most gas prices for commercial and industrial customers in 2019 are between $9-12/GJ.

“Australians should reasonably expect – as a gas rich nation – to enjoy gas prices that reflect the costs of domestic production plus a fair margin for producers. Instead, domestic prices are increasingly based on Asian LNG prices that reflect scarcity of gas in those markets.”

“We will know Australia’s East Coast gas market is functioning efficiently and competitively when we see domestic prices reflect domestic production costs. The Queensland Government has shown continued leadership in developing a model for doing that.” 

“The bottom line is this: if we want a diverse Australian economy that includes manufacturing and other high value-adding industries, and if we want a smoother transition to lower emissions energy generation, we need competitively priced gas.”

 

Contact: Ben Eade, Executive Director, 03 9023 9117