media watch, page-21

CSG, joint-venture sales key to gas crisis: Grattan

http://www.afr.com/p/business/companies/csg_joint_venture_sales_key_to_gas_GZbkpYwT0oiEuoFqV7DFYP

The looming east coast gas shortage could send industrial users out of business and spike household bills unless access to coal seam gas is freed up, the Grattan Institute has advised.

The stalemate over developing coal seam gas in NSW and restrictions on competition in gas supply are combining to create a serious risk of gas shortages in the eastern states as supplies are sucked northwards to Queensland for export, it said in a report.

The looming crisis in gas supplies will hit particularly hard in NSW, which relies on supplies from other states for 95 per cent of its gas.

But it will be households in Victoria that are worst affected in terms of price spikes, while some industrial users of gas could go out of business altogether, the institute warned.

“The potential for tightness in gas supply in the eastern states, particularly NSW, is real,” said Tony Wood, energy program director at the institute.

“The impact on Victorian households is going to be significant, coming on the back of sharp hikes in electricity prices over recent years, although it won’t happen overnight.” The Grattan Institute calculates that the average Victorian household will be hit with a $170 increase in its annual gas bill over the next few years.

More than $60?billion is being invested in three massive plants in Queensland to convert coal seam gas into liquefied natural gas for export to customers in high-paying markets such as Japan and South Korea.

While the booming investment could create the world’s biggest gas export industry by 2017, turning over $53 billion a year, linking the east coast gas market to Asia will force local consumers to pay the equivalent of export prices for their supplies.

LOOMING SHORTAGE ‘A PUBLIC POLICY FAILURE’
Mark Chellew, chief executive of construction materials manufacturer Adelaide Brighton, said he saw the looming gas shortage in eastern Australia as “a public policy failure”.

“It will unfold in terms of the impact on our economy from 2016 on,” Mr Chellew said.

The problem is not one of insufficient gas resources, Grattan says, pointing out that Australia has more than 70 years’ worth of proven and probable reserves of coal seam gas and conventional gas at current rates of output. However, gas prices in eastern Australia, which have been $3.50-$4 per gigajoule, are forecast to reach $6-$9 in 2016-17 once the Queensland LNG projects are fully operational and as costs increase.

Already, Australian Industry Group members are being quoted an average $8.70 a gigajoule for long-term gas supply contracts.