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16 March 2017

State Governments can reserve new gas to secure manufacturing



Media Statement

State Governments have the power to fix the broken gas market. It is time for New South Wales and Victoria to follow the lead of Queensland and South Australia by intervening in the gas market to secure their own supply and safeguard their economies from massive manufacturing job losses.

Manufacturing Australia, which represents Australia's largest manufacturing companies, said today that only State Governments hold the power to secure gas supply for manufacturers. They can do this by incentivising landholders and gas producers, like the South Australian Government is doing, and by reserving new gas for domestic use, like the Queensland Government is doing. 

“Successive Federal Governments approved projects that would send the majority of our gas offshore without first ensuring the local market would be supplied. Those decisions were made and the damage has been done,” said Manufacturing Australia Executive Director, Ben Eade.

“The Gas Supply Guarantee brokered at yesterday’s meeting between the Prime Minister and the nation’s gas producers is very welcome. It should stop domestic industry being forcibly curtailed when gas demand is high, but it won’t correct the overall supply-demand imbalance, and it won’t bring gas prices down to a level at which Australian manufacturing is internationally competitive.” 

“It is now up to State Governments to shore up their own gas supply so that future manufacturing investments can be made, and existing manufacturing plants and jobs remain viable,” he said.

There are five steps to fixing the broken gas market so that it can support ongoing manufacturing investment: 

  1. State Governments should overhaul onshore gas royalties and allow landholders and impacted communities to share in the royalties paid to gas developers. This is what South Australia is doing.
  2. Where moratoriums on gas exploration and development exist, they should be replaced with legislation to allocate specific undeveloped gas tenements to the domestic market. This is what the Queensland Government is doing.
  3. Federal and State Governments should offer direct incentives to encourage gas exploration and development, particularly by emerging producers, to introduce new suppliers into the market. Again, this is already happening in South Australia.
  4. State Governments should introduce and enforce "use it or lose it” rules for onshore gas to prevent commercially viable gas being withheld from the market. These powers exist in some States but are not being exercised.
  5. As agreed at yesterday’s meeting, AEMO should be charged with balancing the gas market on any given day. When supply is tight, the export market should be curtailed, not the domestic market.

“Australia has lots of gas. We should be able to have the best of both worlds: gas for manufacturing and gas for export. But unless State Government’s intervene in their State’s interest, where successive federal governments did not, we will instead see manufacturers go to the wall because they cannot secure gas at competitive prices, Mr Eade said.  

 

Media contact: Ben Eade, Executive Director, 03 9023 9117