Manufacturing push intensifies for gas reserves

The manufacturing sector has increased its push for gas reserves to be set aside, as it seeks to head off a price surge when gas exports from the east coast begin next year.

By InvestSMART · 29 Aug 2013

By InvestSMART ·
29 Aug 2013

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The manufacturing sector has increased its push for gas reserves to be set aside, as it seeks to head off a price surge when gas exports from the east coast begin next year.

A survey by Manufacturing Australia, which is worried about rising gas prices, found 54 per cent supported setting aside gas for the domestic market.

Gas explorers and exporters oppose a policy of so-called gas reservation on the basis that it is impracticable.

But Manufacturing Australia chairman Sue Morphet said: "Unrestricted gas exports will lead to gas price hikes for businesses and households, as well as putting at risk almost 200,000 manufacturing-reliant jobs. Australians will be forced to pay one of the world's highest gas prices, despite having one of the world's largest supplies."

The group wants about 700 petajoules of gas used to be excluded from export - that's about 1.5 per cent of proven and probable gas in reserves on Australia's east coast.

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Frequently Asked Questions about this Article…

What is the manufacturing sector asking for regarding gas reserves?

Manufacturing groups are pushing for a policy to set aside or reserve a portion of gas supplies for the domestic market, aiming to limit exports so local businesses and households don't face a sharp rise in gas prices.

Why do manufacturers want gas reserved for the domestic market?

They are worried that unrestricted east coast gas exports, due to start next year, will trigger higher gas prices for businesses and households and could put about 200,000 manufacturing-reliant jobs at risk, despite Australia’s large gas supplies.

How much of the gas supply does Manufacturing Australia want excluded from export?

Manufacturing Australia wants roughly 700 petajoules of gas excluded from export — equivalent to about 1.5% of the proven and probable gas reserves on Australia’s east coast.

What did the Manufacturing Australia survey reveal about public support for gas reservation?

The survey found that 54% of respondents supported setting aside gas for the domestic market, indicating modest majority backing for some form of gas reservation.

Who opposes gas reservation and what is their argument?

Gas explorers and exporters oppose a gas reservation policy, arguing that such a policy is impracticable and therefore not workable for the industry.

What are the likely consequences of not reserving gas, according to the article?

The article quotes Manufacturing Australia’s chair saying unrestricted exports will likely lead to gas price hikes for businesses and households, risk nearly 200,000 manufacturing-related jobs, and leave Australians paying some of the world’s highest gas prices despite large domestic supplies.

How significant is 700 petajoules compared with east coast reserves?

Seven hundred petajoules represents about 1.5% of the proven and probable gas reserves on Australia’s east coast, so the proposed reservation is a relatively small share of total reserves.

What should everyday investors watch in the gas reservation debate?

Investors should follow policy developments and industry responses because, as the article notes, decisions on east coast gas exports and any reservation rules could affect gas prices and the outlook for manufacturing-exposed businesses and the wider economy.