ACCC concerned that gas shortages are likely to make manufacturing impossible

The Sydney Morning Herald has reported that the chairman of the Australian Competition and Consumer Commission, Rod Sims, said on Tuesday that domestic gas prices are “making it extremely difficult, if not impossible” for some manufacturers to continue operating, unless something is done to remediate the problem.

Prices have increased to above more than $20 per GJ — a seven-fold increase over the $3–4 per GJ price that was on offer until recently.

Sims has said that price rises of such an order of magnitude “will perhaps permanently damage … businesses”. There are a number of manufacturers where gas accounts for as much as 40% of their costs, he said, with some doubts that all of their gas demands can be secured.

“At best, it makes it hard for these companies to invest and plan with such high and uncertain gas prices and with considerable supply uncertainty. At worst, plants will close and jobs will be lost purely as a result of the current gas crisis,” he said.

On Wednesday, Prime Minister Turnbull will meet the heads of the gas companies to clarify how they will address the crisis, which is said to stem from a lack of ready supply.

Queensland’s gas export projects involve three consortiums of local and international oil and gas companies, with the principal domestic investors being Origin Energy and Santos and offshore investors include Shell and Chevron.

“The three [Queensland] LNG producers ... could not have foreseen that after their investment decisions were made east coast onshore gas exploration and development would be largely prevented,” said Sims.

Victoria, for example, has banned all onshore gas exploration and production, which has stopped even conventional gas projects, while projects in both NSW and the Northern Territory face “delays and uncertainty”, he said.

“It is of course up to governments to make such decisions. Having made them, however, it is difficult to see how people can then criticise the commercial contracts that were freely entered into by the LNG producers at a time when the likely supply outlook was very different,” said Sims.

“That said, if I was providing private advice to the LNG producers, I would say they would be well advised to support the domestic market as much as they can at this critical time.”