Call for domestic gas reserves not welcome by major producers

Major gas producers Santos and Origin have rejected calls by manufacturing lobbyists to reserve gas for domestic use.

The Australian Financial Review reports that gas prices are expected to double by 2020 and lobby group Manufacturing Australia claims that the tripling of gas exports by 2017 will cause price spikes and shortages that could cost 200,000 jobs and reduce GDP by $28 billion a year.

As such, the group has called for a national interest test on exports, reserving gas for domestic use and tax incentives to encourage local supply.

Manufacturing Australia claims that under 5 percent of locally produced gas would need to be reserved to help manufacturers. Such a figure would support $29.5 billion of manufacturing output.

Manufacturing Australia chairman Sue Morphet said, “If we had put this into place in the first instance, it wouldn’t be an issue.”

“Because we thought there was just so much gas, no one ever thought there would be a shortage, so there were never any rules of engagement for export licences.”

However, Santos and Origin are opposed to the idea.

According to AFR, Santos chief executive David Knox will tell a conference today, “Talk of reserving Australia’s gas for domestic use will keep it in the ground…..Talk of slowing the industry will slow economic growth.”

Nor is the Federal Government enthusiastic about the plan.

A spokesman for Federal Resources Minister Gary Gray said the government does not believe that such a gas reservation policy would keep gas prices down.

“In the government’s view, it will create uncertainty and deter investment in new gas supply,” he said.

But there is much concern within the manufacturing sector. Morphet feels that a mix of solutions is needed to address the issue. “A number of other countries (such as Canada) have addressed this issue specifically through introducing a ‘national interest test’ for export, intervention in resource tax structures, reservation of certain supply for domestic use or other incentives,” she said.

Image: Herald Sun