There's A Push To Set Local Quotas On Australian Gas Because Global Markets Pay Around 3 Times More Than We Do

Getty/Streeter Lecka

There has been a push to set aside a portion of gas sourced from Australia for domestic consumption so that it doesn’t all get exported to international markets and push up the cost of gas bills locally.

With Australian gas projects and exports ramping up and export terminals coming online there is concern Australian gas prices will jump in line with the global market from as early as next year.

Adding to the price worries is the lack of development in NSW where 95% of the state’s gas is imported from places like Queensland and South Australia – both states which will expand international exports over the next two years.

According to a BIS Shrapnel report, released today, the rising cost of gas will increase pressure on Australia’s heavy manufacturers which have already been hit by the high cost of doing business and the stubborn Aussie dollar.

The report estimates one in five big manufacturers will shut down over the next five years as a result of rising gas prices eating away at margins.

Taking into account the rise in LNG exports, BIS Shrapnel also estimates a substantial jump in gas prices will cause a net loss to the Australian economy of about $101 billion and household gas bills will increase by more than a quarter over the three years from 2015.

Lobby group Reserve Our Gas, which is backed by the Australian Workers Union, is attempting to convince the government to put aside a portion of local gas for domestic consumption at a “fair price”.

It said without the quotas Australians could be looking at a gas price of up to $18 a gigajoule, which is it can sell for on Asian markets. On average, Australians currently pay about $3-$4 a gigajoule.

“Australia is the only nation on earth allowing exporters to extract our gas without restriction and sell it back to us at the global price,” AWU national secretary and Reserve Our Gas spokesman Scott McDine said.

Western Australia mandates that 15 per cent of the state’s gas be reserved for domestic consumption.

Israel, Indonesia and Egypt all have domestic market quotas for gas extracted in their boarders. While in the US gas exports must be in the public interest, a test which enables authorities to maintain a level of control over its export volumes to ensure LNG demand doesn’t outstrip supply and create price hiking shortages domestically.

In Norway, Qatar and Russia state-owned companies take on the role of a producer to ensure a domestic advantage.

After NSW extended its freeze on new gas projects until after the March election, industry minister Ian Macfarlane said, “It is in the best interests of NSW to develop its own gas reserves, both in terms of increasing supply and containing costs as the other states who have traditionally been selling the gas to NSW begin to export LNG.”

“The window in which NSW can do this is closing quickly. Ultimately it’s up to NSW to manage its gas resources, but the longer it waits to advance its local gas industry, the more reliant it will be on higher priced gas from other states for a longer period of time.”

Macfarlane said delaying gas development will mean additional costs to businesses and industries in the state.

“NSW can’t expect other states to subsidise its industry by selling gas to NSW at a discounted rate, thereby short-changing the people of their own states,” he said.

McDine said Australian’s shouldn’t be forced to pay the global price for a resource they own.

“Australians have a right to know their rapidly rising gas bills are actually completely preventable. We just need to do what every other gas-exporting nation does and bring in laws to look after the local population,” he said.

He said without domestic quotas Australian industries, including mining and manufacturing, as well as the jobs and households intertwined with that will be effected.

“We are throwing away hundreds of thousands of jobs, and our national competitive advantage, simply so gas exporters can squeeze a little extra profit out of what is already a spectacularly profitable business,” he said.

“Of course our abundant natural gas can and should be exported to the world. But a portion of it also needs to be providing a competitive advantage to our local industry, and a cost of living benefit to Australian consumers. We can have both, just like every other gas exporting nation.”

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.