Scott Morrison urged to cap gas exports to secure price
The PM has been urged to cap gas exports as a spike in prices threatens plans to expand manufacturing capacity.
Scott Morrison has been urged to “pull the trigger’’ on capping gas exports by the powerful Australian Workers’ Union and a leading employer group, as a spike in prices threatens plans to expand the nation’s manufacturing capacity.
AWU national secretary Daniel Walton said the Prime Minister would be “stomping the green shoots of Australia’s potential manufacturing comeback” if he refused to restrict LNG exports to Asia, with wholesale gas prices more than doubling in the past month in Sydney, Melbourne and Adelaide.
Mr Walton said it was time for the government to “pull the trigger” on the Australian Domestic Gas Security Mechanism, which limits producers from exporting when there is a shortfall in local supply.
“When gas prices temporarily dipped during the pandemic we warned the relief had nothing to do with the goodwill of the big gas companies and everything to do with global demand. Now global demand is coming back Australian factories are getting gouged once again,” Mr Walton told The Australian.
“The PM should ignore the self-interested bleating from the gas cartel and step in to save Australian manufacturing and the hundreds of thousands of quality jobs it supports.
“Australian manufacturing can’t continue to be held to ransom by a small group of gas extracting multinationals who should be grateful for access to our sovereign resources in the first place.”
The ADGSM was designed in 2016 when gas prices were rising and threatening local jobs, but it has never been used by the federal government.
Wholesale spot prices in Sydney were $20.75 a gigajoule on Thursday, up from $10.30 a month ago, while Melbourne prices have risen in the past month from $8.60 to $22 a gigajoule, according to figures from Energy Edge.
Prices in Brisbane have risen from $11 to $18.70 a gigajoule, and from $10.90 to $28 in Adelaide.
Australian Industry Group chief executive Innes Willox said invoking the ADGSM would lower prices “in the short term”.
“But eastern Australian gas prices are soaring today for the same reason they crashed in 2020: because our export-dominated market is driven by prices and demand in Asia,” Mr Willox said.
“No current government policies are capable of changing that. For all the talk of a gas-fired recovery, it is only prices that are recovering.
“As has been said countless times, tens of thousands of Australian jobs either directly or indirectly rely on having affordable and reliable gas available for industry.”
Resources Minister Keith Pitt said the government had not been directly approached by any union or industry group about invoking the ADGSM.
“While the government continues to monitor the situation, advice indicates the issues currently impacting gas prices are temporary and do not require intervention,” Mr Pitt said.
Opposition energy spokesman Chris Bowen said the government needed to explain why local manufacturers were paying more for Australian gas than users overseas – a claim that is rejected by the oil and gas sector.
“This is not an issue of supply, we are the second largest gas producer in the world, with production increasing exponentially in recent years,” Mr Bowen said.
“This is energy policy failure by a government that fraudulently said they would deliver cheap prices – all they have delivered is energy policy chaos.” Hunter MP Joel Fitzgibbon said the only solution to rising prices was to “get more gas out of the ground and to expand pipeline capacity”.
“The ADGSM is a policy which was designed to fail,” Mr Fitzgibbon said.
Australian Petroleum Production and Exploration Association chief executive Andrew McConville said, given most manufacturers were on long-term contracts, spot prices were “mostly irrelevant”. He said the long-term trends were showing a reduction in prices.
“Domestic users are paying considerably less for Australian gas than overseas markets and have been doing so for some time,” he said.
“Price intervention is simply not needed, not warranted and would decimate Australia’s gas industry.”
Energy Users Association chief executive Andrew Richards said most manufacturers were signed to contracts to receive gas at between $8-$9 a gigajoule.
Mr Richards said he was concerned rising spot prices in Asia could lead to higher prices locally.
“The Japan Korea Marker is important because that is the price that the ACCC uses as the basis for calculating the LNG netback price series,” he said.
“That price has historically been used by suppliers as something as a price floor for contract negotiations.
“And that JKM number at the moment is at $18 or $19.”
