Solving Australia’s gas crisis

The Energy Users’ Association of Australia (EUAA), which represents many of Australia’s largest gas users, has released a National Gas Strategy Discussion Paper, posing a range of potential solutions to the gas crisis gripping Australia’s east coast.

The National Gas Strategy Discussion Paper has been released ahead of the EUAA’s National Conference to be held in Melbourne on May 1 & 2.

“Whoever wins the upcoming Federal Election must make solving the gas crisis a priority before we run out of time and options,” said EUAA Chief Executive Officer Andrew Richards.

“It’s not too late to fix this, if we act quickly and decisively.”

Since Australia has commenced exporting gas via the east coast LNG terminals, the cost of gas for Australian users has gone up by as much as 300 per cent. While the market has softened in the last 12 months, gas costs are still 200 per cent higher today than they were four years ago.

Supply constraints including state-based moratoria, a lack of genuine competition, low liquidity levels, poor transparency and lingering issues with pipeline pricing are all issues that need to be addressed.

“We need to recognise that mistakes have been made in the past and that we have failed to strike the right balance between maximising LNG exports and maintaining a reasonable price for Australian gas users.”

Many industrial gas users are reporting that if costs do not come down to more sustainable levels we are highly likely to see significant demand destruction, jobs losses and higher prices of many day to day items used by every Australian.

“The EUAA acknowledges the Federal Government has taken some actions to address this situation but unfortunately it has not been enough and clearly more needs to be done.”

The EUAA discussion paper seeks to kick start the gas market reform conversation that seems to have fallen off the political radar over the past 12 months. It puts forward options ranging from a COAG Energy Council led market reform process through to direct government assistance and market intervention.

Many of the policy and regulatory options put forward in the discussion paper borrow heavily from initiatives either already in place or being seriously contemplated in electricity markets, such as asset underwriting and funding assistance. Many of the issues facing gas markets are similar to those in electricity markets so using these existing initiatives makes perfect sense.

“While people may baulk at some of the options put forward in this discussion paper, the EUAA suggest that some different thinking is required. Given the gravity of the situation, we need a step change in policy, not more incremental changes.

“Big solutions are required to solve big problems, including the potential of governments stepping in for a period of time to ensure the viability of many of our gas intensive industries such as food processing and building products manufacturing.

“We are confident that the gas crisis can be resolved if governments, industry and gas users act quickly and decisively. We think our discussion paper is a good starting point.”

Combined, EUAA members employ over one million Australians, pay billions in energy bills every year and include industries such as food production, packaging, mining, raw materials, building materials, paper production and healthcare – creating essential items used by the Australian community every day.

The EUAA National Conference will run across May 1& 2 at Marvel Stadium in Melbourne. For more information and to download the conference program visit the EUAA website.

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