Energy bosses called to crisis talks on gas threat

Tuesday 06th December 2016 0:00

Greg Hunt has summoned the nation’s leading energy executives to Melbourne for crisis talks today on looming gas shortages that are causing spiralling prices and threaten manufacturing jobs.

The Industry Minister will use the meeting to increase pressure on the Victorian and NSW governments to ease restrictions on gas exploration and development that has tightened supply as Queensland liquefied natural gas exports move into full swing.

Today’s meeting comes ahead of a Council of Australian Governments meeting on Friday at which the federal government will tackle rising concerns about ­energy security sparked by the ­recent blackout in South Australia and steep increases in contracted gas prices for manufacturers.

Mr Hunt has taken aim at “blanket” moratoriums on gas ­exploration onshore imposed by Victoria and NSW, which means the country is facing supply constrictions when there “is no shortage of supply”.

State bans were restricting ­release of significant new reserves of conventional and non-conventional gas, the minister said.

Today’s talks will also place ­energy executives on notice to maintain competition in a market where manufacturers are complaining of difficulty getting more than one company to bid for supply contracts, in the face of price rises between 50 and 300 per cent.

Chief executives from producers Santos, Esso, Shell and Origin will attend the meeting.

Welcoming today’s meeting, Australian Industry Group chief executive Innes Willox said the states needed to address the “dwindling” supply of gas, or ­industry would not invest and jobs would be lost.

“We are getting to a point where Australia has lost its energy advantage and we are now at a point where energy is becoming a huge issue when it comes to ­investment,” Mr Willox said.

“It is becoming a massive issue of confidence for Australian business that needs to be addressed quickly. The states need to recognise that without a gas industry, we will not invest in their states, and if they want to create jobs they need to be able to guarantee gas supply.”

Mr Hunt last week warned of a manufacturing crisis arising from the gas supply shortage as he hit out at “negligent” state bans on exploration. Mr Hunt said the talks, also ­attended by Resources Minister Matt Canavan, were aimed at ­developing strategies to ensure a reliable and affordable supply of gas to meet domestic needs.

Mr Hunt sees reliable gas supply as crucial to the government’s bid to integrate climate change and energy policy while maintaining energy security. “Gas is the single energy source which manages to achieve energy security, ­affordable energy and emissions reduction — it represents the holy trinity of energy,” he said.

NSW, which has effectively banned onshore exploration because of strong opposition to coal-seam gas fracking, imports about 95 per cent of its gas, while Queensland exports most of its production under long-term foreign contracts.

In Victoria, 30 per cent of all gas is used for manufacturing, and firms signing new supply contracts are reporting price rises of 50-300 per cent. With the imminent close of Hazelwood coal-fired power station, the state will become a net power ­importer.

Today’s talks come ahead of potential strike action by 600 Esso workers in Victoria this week that could shut down gas supply to southeast Australia and trigger immediate domestic shortages.

“This is about supply to unlock any barriers and to try to work ­effectively to put pressure on all of the states and territories to move quickly to release more gas,” Mr Hunt said.

Manufacturing Australia chairman Mark Chellew, who has called for “urgent” action in ­response to the Australian Competition & Consumer Commission report into the east coast gas market released earlier this year, said the sector faced an “alarming” set of circumstances.

“My view is that this is the greatest public policy failure since federation,” he said. “The significant problem is that Australia has allowed its gas to be sold offshore without significant gas being available for the domestic economy. That, coupled with our ­renewable energy target has led to electricity prices spiking and very, very high natural gas prices.”

Mr Chellew warned the problem was set to become significantly worse, with new supply contracts potentially needing to be met by imported gas in only two years’ time.

National Secretary of the Australian Workers Union Daniel Walton said the idea of a national gas shortage was “pure garbage” and renewed calls for a domestic gas reservation policy.

“We have plenty of gas already for both our own needs and for ­export. The only problem is we’ve allowed multinational gas exporters to completely set the terms,” Mr Walton said.

“Australia gets the world’s worst deal from multinational gas exporters: no special access to our own gas and pathetic tax ­revenue.”

AWU Victorian state secretary Ben Davis, who has criticised the Andrews Labor government’s moratorium on new conventional gas exploration and extraction onshore for the next four years, said the gas supply problem was deterring investment in the state.

“I am certain it is impacting on jobs, even if we are not hearing about it yet. If you increase any input cost, that obviously affects any company’s profitability, which has to have an impact on jobs,” Mr Davis said.

Australian Food and Grocery Council chief executive Gary Dawson said major food processors were grappling with “savage” price hikes that were flowing through to food manufacturing costs.

“Australia has ample gas ­reserves but we have got this crazy situation where there is no prospect of new gas supply coming on, and most of the available gas is going to export,” Mr Dawson said.

“(Australia’s gas reserves) should be a source of comparative advantage for Australian processors and yet in fact the exact ­opposite is true.”

He warned that job losses were inevitable as production costs rose, with the “highly competitive trade-exposed sector” making it impossible to pass on costs to consumers through price increases.

“For manufacturing states like Victoria and NSW, it is going to result in job losses across the manufacturing sector and that is going to hit the state economies if they don’t act,” Mr Dawshe said.

Energy Minister Josh Frydenberg said the Coalition had been steadily opposed against gas ­reservation policies and that ­option was not under government consideration.

“The federal government has been consistently against a federal gas reservation policy as it acts as a disincentive to further investment, exploration and development of resources,” he said.

Read more here: http://www.theaustralian.com.au/business/mining-energy/energy-bosses-called-to-crisis-talks-on-gas-threat/news-story/1b8bbcc2e8be0b35f5e2bbeed41d84ea