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Campaign to share Australia’s gas reserves

LNG Industry,

Australian industry and households should gain from the country’s natural gas reserves – and not just multinational gas exporters – according to the Reserve Our Gas coalition, which launched earlier today.

Gas prices in Australia are expected to increase threefold due to the ramping up of LNG exports, expected to begin in 2015. Reserve Our Gas will campaign for the introduction of laws to prevent this by ensuring that a share of Australian gas is kept back for domestic use at a fair price.

The new gas export industry is linking Australia to the high global price for gas, and projections show local gas prices rising dramatically over the coming years as a result. While Australian gas has traditionally cost around AU$ 3-4 per gigajoule domestically, it can sell for up to AU$ 18 per gigajoule on Asian markets.

At present, Australia is the only gas-exporting nation in the world without laws to ensure that its domestic consumers are not adversely affected by the linking of gas to global markets.

The campaign, initiated by the Australian Workers’ Union, has been backed by Alcoa, Australian Paper, and the ACTU, and more partners are expected to join over the coming days and weeks.

“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.

Rising gas bills preventable

“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. Australians should pay the Australian price for gas – not the global price – because it’s our gas. “We currently have a situation in which our abundant gas reserves are hurting Australian jobs and households instead of helping them. That’s crazy and it’s no wonder no other gas-exporting nation allows it.

“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.

“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.”

A BIS Shrapnel report into the impact of this change, released today, has found that rising gas prices will cause the following:

  • One in five heavy manufacturers will shut down within five years. Total manufacturing production will be reduced by 15.4% by 2023. 913 000 jobs will be lost in this period as a direct result of manufacturing shutdowns, with 235 000 jobs to go economy-wide.
  • Taking into account the economic benefits of LNG exports, the net loss to the Australian economy will be AU$ 101 billion.
  • Households gas bills to rise by 26% over three years from 2015.
  • Australian gas profits will be directed offshore – only 18% of Australia’s gas will be extracted by Australian-owned firms (including BHP which is only 58% Australian).

The BIS Shrapnel report has found gas extraction has a spectacularly high profit ratio of 66%. This compares to iron ore 32%, and coal 3.4%.

Gas reservation schemes

The report found every gas-producing nation in the world, aside from Australia, has a gas reservation scheme or equivalent laws to protect local industry and consumers.

Israel, Indonesia, Egypt each have laws requiring that a percentage of gas extracted must stay within their domestic markets.

In the US, gas exports must be found to be in the ‘public interest’ by the Department of Energy (DOE). The existence of the public interest test is deliberately loose and allows the US to maintain control over its export volumes and ensure that any increase in LNG demand does not outstrip available supply and create shortages in domestic markets. Canada has similar ‘public interest’ laws around the export of its gas.

Norway, Qatar, Russia, Algeria, and Malaysia ensure domestic advantage from their gas reserves by having state-owned companies taking the role of dominant producer.

The BIS Shrapnel report also noted that Western Australia’s gas reservation policy, which mandates the reservation of 15% of Western Australia’s gas, has not hindered gas investment. AU$ 88 billion has been invested in Western Australia’s gas production since reservation was introduced in 2006.

Adapted from press release by Ted Monroe

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