Gas supply concerns fire up

Gas supply concerns fire up


Wool
LNG ship. Photo: Robert Shakespeare

LNG ship. Photo: Robert Shakespeare

Aa

The general manager of Australia’s largest wool manufacturer claims domestic gas supply is being choked by an export-focused “cartel” after the company was slumped with a 100 per cent increase in gas costs.

Aa

THE general manager of Australia’s largest wool manufacturer claims domestic gas supply is being choked by an export-focused “cartel” after the company was slumped with a 100 per cent increase in gas costs.

Victoria Wool Processors (VWP) general manager David Ritchie, Laverton North, Vic, felt the reverberations of the Australian Energy Market Operator’s warning of liquefied natural gas (LNG) supply shortfalls, as early as 2019, when the gas contract with Energy Australia would not be renewed for next year.

VWP require 110,000 gigajoules of gas annually to treat 12,000 tonnes of greasy wool the company processes every year.

This week, Mr Ritchie has secured a contract with Origin Energy worth $1.5 million annually – double the value of the former contract.

“My challenge is to come up with significant savings to offset these costs - we will probably run at an accounting loss next year,” he said.

Whether the 40 staff would be impacted by the company’s financial pressure, Mr Ritchie said job cuts would “be the last resort”.

The increase gas bill has forced a $500,000 effluent treatment upgrade to be put on hold.

“The three main processors that remain are family owned and have the biggest investment in the wool industry than anyone else,”  Mr Ritchie said.

“We have the best part of $20 million tied up this business.”

Mr Ritchie said gas prices threaten Australia’s four remaining wool processors. 

Since the 1990s, Australia’s wool processing sector has contracted from 21 to just four in the face of China’s low labour costs.

“This market would be nearly 100pc exposed to China which will have a dominant position if the Australian plants close,” he said.  

“With the way energy prices are going, this Australian industry is under threat.”

Mr Ritchie believes government should investigation Australia’s major gas retailers on export and domestic price disparities.

“There needs to be an investigation (to make sure) there is not cartel (behaviour) happening to force up domestic gas prices and to cover for their problems they have in the export market,” he said.

“Something is out of whack between international prices and domestic prices.

“We need the government to verify that the market price is not an artificial shortage, created in Australia to force gas prices up.”

While consumer advocates warn the cost of gas bills might surge as high 9.2pc next year, global trade prices have softened.

Australian Petroleum Production and Exploration Association (APPEA) chief executive Malcolm Roberts said the shortfall was due to falling supply from gasfields in the Cooper Basin and Bass Strait.

LNG ship. Photo: Robert Shakespeare

LNG ship. Photo: Robert Shakespeare

“We have a tight market because supply is being constrained,” Dr Roberts said.

“Domestic prices are rising because we are exhausting the high quality, accessible reserves that we have relied on for decades. 

“… The industry is having to develop new, more costly resources - such as deeper offshore wells and coal seam gas resources.  Higher production costs inevitably flow through to higher prices.”  

Dr Roberts strongly refuted Mr Ritchie’s claims of an “artificial” market shortage, citing the Australian Consumer and Competition Commission’s investigation into the east coast gas market found no evidence of collusion. 

He said factors influencing domestic supply include global oil prices, high production costs, demand, political uncertainty, excessive regulations and bans on onshore gas exploration.

“The warning signs are stark but continue to be ignored by governments which impose moratoriums on onshore exploration and development,” Dr Roberts said.

“Members of Parliament should be absolutely clear - a vote to restrict gas development is a vote for higher gas prices for families and businesses.

Federal Environment and Energy Minister Josh Frydenberg said a blanket moratorium on gas exploration was not the answer.

 “… We need more gas supply and more gas suppliers in the market to help keep electricity prices lower for consumers and to ensure the lights stay on as we move to a lower emissions future with more intermittent generation," Mr Frydenberg said.

 “The right balance can be achieved where more conventional and unconventional gas is extracted while sustainable environmental practices are maintained.”​

The story Gas supply concerns fire up first appeared on Farm Online.

Aa

From the front page

Sponsored by