1 November 2012

We can have our gas and heat it too

Letter to the Australian Financial Review: Dick Warburton, Executive Chairman, Manufacturing Australia

The high dudgeon from the gas industry is misguided, as evidenced by letters from the APPEA (Gas reservation regressive, Letters, October 23) and Santos (Gas prices must reflect production costs, Letters, AFR, October 24). What local manufacturing is saying is that we can have our cake and eat it, too.

For example, Qatar is the world’s biggest gas exporter but also has a huge petrochemical industry built on economically priced gas. This structure has been adopted by every other gas-rich country in the world.The Queensland manufacturing sector requires only 10 to 15 per cent of the proposed production. The ongoing economic benefit of this 10 to 15 per cent is greater than that of the exported 85 to 90per cent, as demonstrated by industry studies.

One of the problems for the gas industry is that the initial optimism regarding estimates of CSG production has rapidly collapsed, which is leaving some gas companies scrambling to fill export contracts and indirectly putting much of Queensland manufacturing in a precarious situation.As for the price being offered, a price equivalent to full LNG netback parity is the effective price being quoted to one of our member companies that’s $12 delivered to their site.

As a representative of commercial enterprises, Manufacturing Australia doesn’t begrudge gas companies seeking to maximise returns to shareholders. However, we say there is a role for government as only government sits across the value-chain from wellhead to manufactured product and its use; government is the custodian of this public resource; and government has a responsibility to maximise benefits to the nation.

We want to work with governments and the gas industry to find a solution. If the factories using gas are forced to close, that’s not good for the gas producers either.