The Australian oil and gas industry has reportedly welcomed findings of a new report from customers that have highlighted the urgent need to remove regulatory constraints and increase production of natural gas across eastern Australia. The report, ‘Gas market transformations – Economic consequences for the manufacturing sector’, was commissioned by gas customer groups and says that increasing natural gas supply in Australia and putting downward pressure on gas prices is critical to ensure the competitiveness of the manufacturing industry. The report also states that gas customers no longer see gas reservation policy as a credible or workable solution to combat the challenges currently being faced.
The APPEA has in the past highlighted that state government restrictions on industry activity will impact gas supplies. It has also been encouraging customers that now both recognise and are advocates for the removal of artificial supply restrictions in the country. The APPEA has also said that it is pleased that the report has highlighted the economic benefit associated with the on going expansion of Australia’s LNG industry. Australia is reportedly working on AUS$ 200 million of projects and is set to become the biggest exporter of LNG in the world by 2018.
Gas and the findings
The report has said that gas production is one of the highest value adding industries in Australia, and this reflects the technologically sophisticated and innovative nature of natural gas production. The report reads, ‘given the high value added contributions associated with the gas sector, summit the industry value added impacts for all sectors gives an overall net increase in GDP over the forecast period.’
It is known that Australia has a lot of gas available to both domestic and export markets and the APPEA believes, that by allowing market forces, rather than encouraging government intervention, to determine when and how Australia’s gas should be developed would realise benefits for all Australians.
The APPEA have said of the report that rising prices do not mean market failure, so that is why other policy prescriptions in the report have been deemed unnecessary. Australian gas producers and consumers are entering/have entered into approximately 16 gas supply agreements and other commercial arrangements across the eastern gas market since the end of 2012. The scale and range of the agreements suggests that there is enough information available now to allow supply contracts to be concluded between genuine buyers and sellers.
Also, in addition to removing restrictions on gas supply, the best policy response from governments is thought to be the assistance to manufacturers under pressure to respond to changing market conditions and focus on initiatives that boost productivity, encourage investment and greater flexibility in the labour market.
The APPEA reportedly believes that the above will give companies, including manufacturers, the best chance to adapt to structural pressures and increase international competitiveness. Also, moves to increase the transparency and efficiency of the eastern Australian gas market are apparently under consideration as part of the development of the Australian Government’s White Paper.
Adapted by Claira Lloyd
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