Rising gas prices on Australia’s east coast are forcing companies out of business and the situation could get worse without immediate action, according Rod Sims, chairman of the Australia Competition & Consumer Commission (ACCC).
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| ACCC chairman Rod Sims at APPEA in Brisbane |
Echoing long-held concerns of industry group the Printing Industries Association of Australia (PIAA), Sims told the 2019 APPEA Oil and Gas Conference in Brisbane that high wholesale gas prices meant many Australian manufacturers were struggling to compete internationally.
“Businesses that rely heavily on gas are increasingly likely to relocate from the east coast or wind up their operations," he said. "Commercial and industrial gas users have been telling us for some time that at those gas prices, their operations are not sustainable in the medium to longer term.”
Sims has urged producers to invest in gas production and said state governments had to ‘play their role’ in providing access to gas resources.
He pointed to last week’s announcement by Dow Chemical that it would close its Melbourne manufacturing plant due, in part, to high gas prices. It came after RemaPak, a Sydney-based producer of polystyrene coffee cups, and Claypave, a Queensland-based brick and paving manufacturer, entered administration citing rising gas costs as an important contributing factor.
“Many other manufacturers are close to making critical decisions on their future operations. If wholesale gas prices do not soften, it is just a matter of time before they follow Dow, RemaPak and Claypave,” Sims said.
PIAA CEO Andrew Macaulay told members last year the industry needed immediate help with energy prices. “The impact of exponentially increasing energy prices is crippling our industry and poses a serious risk to employment and manufacturing in Australia. We hear your stories and we understand the impact it is having on your business decisions in order to achieve your targets. Whilst parties across the spectrum are looking for the medium-to long-term view, industry needs immediate relief.”
An ACCC report has noted that after increasing over the course of 2018, expected LNG netback prices have fallen significantly over the past six months. “We expect that those same suppliers have revised their prices down this year to reflect these latest expectations as quickly as they escalated them last year,” Sims said. "So far we are not seeing this.
“I urge producers to carry out the investment in gas production they planned,” Sims said. “Also, as I have done for some time now, I urge state governments to play their role in providing access to gas resources by adopting policies that consider and manage the risks of individual gas development projects, rather than implementing blanket moratoria and regulatory restrictions.”
Lobby group Lock the Gate Alliance says 70% of all gas produced on the east coast is exported overseas, thereby linking local and global pricing.
Sim's full speech is available here.
