Manufacturers concerned over gas prices

Manufacturers are concerned about how they will cope with the likelihood of uncertain gas supply and steeply rising prices. Analysts have warned of a gas supply 'cliff' or sudden shortfall in the next 12 to 18 months, as gas suppliers are diverting more and more gas away from the domestic market to the more lucrative export market. Retailers have also been warning that the price of gas is likely to increase as that happens.

Australian Paper employs 950 people in Gippsland in regional Victoria. Energy manager Brian Green said the company had spent $650 million in the region over the last 10 years, while 22,000 people in the region's forestry sector rely on the business.

He said the paper industry operated on tight margins and the problems they and others were having with gas supply and price could force manufacturers out of the country.

"Australia as a nation is looking to be a cheap and reliable energy exporter, which is effectively giving gas to our competitors, giving away our competitive advantage and putting manufacturing and jobs here in Australia at risk," he said.

Smaller businesses are struggling as well. BOC, a member of the Linde Group, operates three small plants in Tasmania, Victoria and Queensland that convert gas into liquids.

They sell it to companies like Nestlé who are off the gas pipeline network. Spokesman Alex Dronoff said BOC was not able to secure long-term supplies.

"We went out to tender last year to get a five-year deal for gas for our Tasmanian plant and we couldn't get that," he said. "The maximum we got was three years at an inflated price (in my view), and that's why we didn't proceed."

Dronoff said the industry was dominated by three big players - Santos, BHP and Exxon - but Australia could learn from the US where the economic resurgence was being driven by a big supply of shale gas and a large number of suppliers.

Geoscience Australia's latest surveys showed there were 40 gas basins across the country and fewer than half of them were currently in production. Tapping those will be difficult, though, with moratoriums in place in NSW and Victoria and an inquiry underway in SA.

Source: ABC News