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supply issues – which will in tur n assist in bringing prices down. In the
meantime, Government should seriously consider whether it wants a
short-term gas supply crisis to permanently damage some sectors of the
economy.
“If businesses are not viable in the long-term, then market forces should
allow them to close or move offshore, but if the dramatically high pr ice of
this input to their business is temporary, the Government should step in.
“As we have seen already, a failure by Governments to step in has led to
the closure of many manufacturing businesses – including steel pipeline
manufacture, which has closed forever because of the high Australian
dollar and the tardiness of any useful action by the Government’s
Manufacturing Taskforce, led by former Queensland Premier Peter Beattie.
“It would be a tragedy if this mistak e is repeated. Future transmission
infrastructure construction will be hampered by the lack of local production.”
On the other hand Santos welcomed the Energy White Paperand its
recognition of the important role natural gas will play in Australia’s energy
future.
Santos Chief Executive David Knox said, “Australia’s abundant gas resources,
together with the economies of scale provided by the export LNG market,
put us in an enviable position to both adequately supply our domestic
market and deliver the significant economic benefits possible from Asian
demand growth.
“Interventions in gas markets that disrupt the natural economic forces
of supply and demand will result in Australia’s gas resources being
uneconomic and ultimately unavailable to Australian industry and
consumers. This will undermine the more than $180 B being invested in
Australia’s LNG sector and the significant follow-on investments which are
currently in the planning phase.”
chemicals industry alone, as well as other value-adding manufacturing like
plastics, aluminium, steel and automotives,” Petersen said.
“The US has taken a strategic approach on energy security and requires
LNG exporters to prioritise the local economy. Canada also applies a
national interest test on exports to ensure the domestic market is not
disadvantaged in any way. It makes no economic sense for Australia to link
our domestic gas prices to the world’s highest prices in Japan.”
Petersen said the market has failed to deliver and governments must act in
the national interest to ensure supply.
“Most of Australia’s gas resources are now controlled by a handful of very
large producers who think in terms of multi-billion dollar LNG contracts.
Selling to smaller Australia customers will not happen voluntarily,” he said.
“These resources belong to all Australians. Simply saying ‘Let the market
work’, as the White Paper does, is not in the national interest.”
It should be noted that Australia is the only country in the world where
international oil companies can openly access and expor t gas without
prioritising the local economy.
It is also the only major gas pr oducing country facing serious shortages
and sharply rising prices.
The DomGas Alliance welcomed proposed changes to improve
transparency and participation in the management of offshore retention
leases. These changes were recommended six years ago in 2007.
Santos acknowledged the Energy White Paper’s challenge to ensure the gas
industry’s competitiveness amid rising construction costs and increasing
competition from emerging global suppliers.
Knox said “it is vital that the industr y address these cost challenges
through the application of new technology, innovation and the ongoing
development of a skilled and mobile labour force.
“Santos is making inroads into reducing its own costs and will continue
to work with the broader industry to ensure that the future pipeline of
projects is competitive and attracts the investment needed.”
In opposition to this – the DomGas Alliance claimed the Energy White
Paper effectively surrenders Australia’s competitive advantage in energy.
In a statement released in response to The Energy White Paper DomGas
said that despite a massive increase in gas production, Australian industry
cannot secure long term supply at affordable prices.
Australia now has some of the highest domestic gas pr ices in the world at
around $8 – $12 per gigajoule. This compares to just $3.50 in the US and
$3.20 in Canada.
DomGas Alliance Chairman, Tony Petersen, said Australia’s approach
contrasts to the United States where a manufacturing renaissance was
underway on the back of affordable gas.
“Affordable gas has driven some $US 40 B in ne w investment in the US
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