Just for FYIarticle is publicly available at...

Just for FYI

article is publicly available at
http://www.theaustralian.com.au/business/companies/gas-policy-vacuum-puts-us-on-course-for-a-train-wreck/story-fn91v9q3-1226700170046


Gas policy vacuum puts us on course for a 'train wreck'

by: MATT CHAMBERS
From: The Australian
August 20, 2013 12:00AM


AUSTRALIA is facing a natural gas "train wreck" as Gladstone LNG plants threaten to suck up more gas than is available and raise the need to at least consider reserving gas for domestic use, the head of one of the nation's biggest manufacturers says.

Wading into the growing debate about how to deal with an expected surge in east coast gas demand as $70 billion of coal-seam gas export plants fire up in Gladstone over the next three years, BlueScope Steel chief Paul O'Malley identified rising gas prices as the biggest energy challenge his company was facing.

"Australia is the only country in the world that exports gas without having a national gas policy and understanding how gas is positive for value-added industries as well as for export," Mr O'Malley told The Australian yesterday.

"I think there is a problem, and quite frankly I think there's a train wreck coming."

The steel boss stopped short of calling for a gas reservation policy, but said it needed to be considered.
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"Very quickly after the election, we need the policymakers to get all the facts so they can look at the pros and cons of whether there's reservation or no reservation, whether there should be improved ease of exploration and supply, whether there's new pipelines needed," he said.

While Labor has maintained its longstanding commitment to not reserving gas for domestic use, the Coalition has flagged it would look at promoting acreage reservation for new projects.

Mr O'Malley has previously let BlueScope's position on domestic gas be represented by industry groups. But he is now speaking out strongly, joining the likes of Incitec Pivot chief James Fazzino and Dow Chemicals boss Andrew Liveris in calling for action to assist manufacturers.

"If you look at energy costs (for BlueScope), the big factor is going to be gas and just the fact that natural gas prices are increasing," the BlueScope boss said.

"We're a bit challenged by that and we're a bit challenged by the fact that LNG (producers) probably overestimated the amount of gas they'd be able to access and now they are taking it from residential and commercial-industrial users in Australia."

BlueScope's gas contracts are up for renegotiation in a couple of years, he said.

The construction of three LNG plants at Curtis Island in Gladstone -- being operated by Santos, BG Group and an Origin Energy/ConocoPhillips joint venture respectively -- will almost instantly triple east coast gas demand.

Gas buyers need to pay wholesale prices for contracts beyond 2015 that are more than double the $3 to $4 per gigajoule prices Australian gas has been priced at in recent years.

"We need to spend the next three to six months (making policy) to ensure there is enough gas for domestic use and for a successful LNG industry," Mr O'Malley said.

"At the moment, I don't think that is the policy setting because I don't think everyone understands we could have a significant shortfall in gas in Australia in the next three years that would be bad for industry."

The loss of the value that is added to gas in Australia by manufacturers could be greater than the benefit of the equivalent LNG exports, he said.