Domestic gas prices will continue to rise rapidly as more gas is being sold overseas, a new report has warned.
Commissioned by six industry associations, the report by Deloitte Access Economics says the increase in exports could devastate local industries, and lead to increased household prices.
Lock the Gate Alliance national coordinator Phil Laird said the report highlighted the urgent need for national regulation and oversight of the gas industry.
Mr Laird said the Minister for Industry and Energy Ian Macfarlane was ‘noticeably silent’ on this issue of national importance.
‘The federal government has the power under its corporations power, its trade and commerce power and its external affairs powers of the constitution to ensure that the national interest is protected in this case,’ Mr Laird said.
‘Australia has one of the largest gas reserves in the world yet we are selling it overseas at the expense of local manufacturers and domestic consumers.
‘Arguments that small fields such as the Pilliga in north west NSW or Metgasco’s field in the Northern Rivers of NSW have to be extracted to prevent a gas shortage are simply ridiculous.
‘These reserves will be sent overseas if the price is right and local landholders will be left with a legacy of contaminated land and water. It’s not safe for our communities and it’s not safe for our economy.
‘What this report highlights is that there has been a failure of gas policy in Australia and to solve this all options should be on the table including a national gas reservation plan and a push to renewables.’
Energy Users Association chairman Brian Green told Echonetdaily that it was time for governments to consider a two-tier market that would set a domestic price that was lower than the export prices.
Mr Green said the development of the coal seam gas industry was taking longer to establish than had been expected which meant that gas was not flowing as quickly.
‘As a result Liquid Natural Gas suppliers were short of gas to meet their contracts for export and they were now looking to buy gas from the domestic market,’ he said.
‘The effect of that is that domestic users are competing with the international market for gas’.
Mr Green said other energy rich countries such as Canada and the United States had a two-tier market system where ‘some priority is given to supplying the domestic market at a pricing range stimulated by local demand’.
‘This means there are two different prices for the one product but in Australia there is no such distinction and the various governments seem to have stepped back from the issue.’
Mr Green said the report predicted that there would be a loss of $118 billion to the economies of NSW, Victorian and Queensland over the next seven years.
‘That’s coming about from a loss of manufacturing and the loss of around 14,000 jobs over that period,’ he said.
‘An example is when LNG is sold into the Japanese market the landed price is $16 per gigajoule. Then we need to look at shipping and the cost to liquefy and then convert the gas back. That’s around $5 per gigajoule which makes the price in Queensland $11.
‘The domestic user in Queensland suffers because the producer can get $11 where previously it would have been $4.50.
‘Not many industries can support that sort of price increase’.
Mr Green said the Energy Users Association represents major firms such as Woolworths and BHP Billiton but any reduction in the domestic price of gas would have a flow on effect to households.
‘Gas is going to be dearer and there is no option we can see that maintains gas pricing but the question is does it need to go up to (export prices),’ he said.
Mr Green said the demand for gas would increase by three times from 730 petajoules per annum to 2100 peta joules by 2016 because of increasing exports.
‘It’s the quantum of that rise and the timing of it that is causing some temporary imbalances. The problem we’re looking at is that on current forecasts and the current regulatory position quite a number of manufacturing businesses will fail to survive the transition from a pure domestic market to a combination of a domestic and international export market.
‘Bringing more gas supply on board is one way of addressing some of these issues and limiting price rises,’ he said.
‘That will come from the development of onshore gas supplies.
‘We recognise there needs to be stringent environment controls but at the same time, adopting the attitude of ‘Not in my backyard’ is not going to do anyone any good.
Mr Green conceded that the stiff opposition that miners faced in the northern rivers region showed that governments and manufacturers had failed to pick up the concerns of groups around non-conventional gas mining.
‘As a result there are a lot of concerns, some of which are founded, some which are not, but these concerns need to be addressed,’ he said.
‘But putting a blanket ban on mining is also not the answer’
‘With regards to agricultural land, you can do just as much damage sinking a bore on a property than you can with a gas well.
Mr Green said producing more gas was imperative.
‘If you can get the development side going and keep a lid on price rises then that flows through to households,’ he said.
‘But if people are put out of business then no one will be isolated from that,’ he said.
Meanwhile, a former Queensland government worker has claimed the Queensland Government approved the Gladstone LNG and QGC Queensland Curtis LNG projects without any cost benefit analysis despite this being a requirement of the EIS process.
Whistleblower Simone Marsh said the Queensland coordinator general signed off on both projects in 2010 without this critical information even though it was obvious that gas prices would rise and manufacturing would be the loser.
Ms Marsh said she had warned that the EIS documents were missing any cost benefit analysis before the projects were approved but her warnings were ignored.
‘I am not an economist but even I could see that the projects would have a major impact on gas prices,’ Ms Marsh said.
Aiden Ricketts from Gasfield Free Northern Rivers told ABC radio that the mad gold rush into gas export was causing the price rise.
‘The idea of increasing production is not going to solve this without significant market reform,’ he said.
‘We could destroy all the agricultural lands of Queensland and NSW and still have little impact on the price of gas.’
Mr Ricketts said it was time for government to intervene to protect the domestic gas market and existing manufacturing industries.
‘We need to respect those industries that actually manufacture things like the agricultural industry rather than those that just dig up resources and send them overseas,’ he said.