Manufacturers: Gas carve-outs could mean top-dollar bills or ‘closing operations permanently’
The peak body for major manufacturers says Canberra’s draft could cut exporters’ local gas targets. It wants annual supply obligations in WA, while Woodside and Chevron warn the rules could deter investment.
Canberra’s contentious gas reservation plan could leave factories stuck with high bills without bringing more gas to the domestic market, manufacturers warn, while producers say tougher rules could scare off new investment.
The warning came in a submission by the Energy Users Association of Australia, which represents some of the nation’s biggest manufacturers and gas users, including Wesfarmers, BlueScope Steel and Visy. It says its members employ more than one million Australians and pay billions in energy bills each year.
Canberra initially proposed requiring exporters to supply Australian buyers with gas equivalent to 20 per cent of their exports. The draft watered that down to “up to” 20 per cent, allowing the regulator to set a lower annual target if forecasts show the domestic market needs less gas.
Sign up to The Nightly's newsletters.
Get the first look at the digital newspaper, curated daily stories and breaking headlines delivered to your inbox.
By continuing you agree to our Terms and Privacy Policy.The association says that flexibility works only one way. If the forecasts underestimate demand, exporters’ targets may already have been cut, yet the draft provides no clear way to correct the shortfall and still caps obligations at 20 per cent.
“Domestic consumers should not bear the downside risk of inaccurate forecasting,” its submission says.
The group also wants the scheme judged on price, as well as volume. For industrial users, affordable gas is “the difference between remaining viable or closing operations permanently”, the submission says.
Another proposed carveout for gas exporters has the association up in arms: their domestic supply targets could be cut to account for existing liquefied natural gas export contracts or problems getting gas to local buyers.
Acting chief executive Leigh Clemow said the gas industry had already secured concessions and “that’s where it must end.”
“We’ve seen this dynamic before: incremental pressure that gradually erodes the intent of the legislation. That can’t be allowed to happen again, and Government has a critical role in holding the line.”
Woodside and Chevron warned on Wednesday that the draft still left too much riding on decisions by future ministers, making it harder to commit billions to new gas projects.
Woodside chief operating officer Breyden Lonnie told an energy forum this week the rules better recognised that WA and the east coast were separate markets, but said ministerial discretion remained a concern.
“There are elements around ministerial discretion … that is a concern for us because projects look for certainty,” he said.
Chevron director of operations and maintenance Andrew O’Connor said: “Investors look for certainty and predictability. These take billions of dollars upfront, and then they play out over decades.”
Producers are also divided from the Government over what they must do with gas reserved for Australia. Santos chief executive Kevin Gallagher has argued for WA-style rules requiring exporters to offer gas to local buyers on commercial terms.
Canberra has retained a requirement to supply it, with Resources Minister Madeleine King saying earlier this month that “only offering gas has not worked”.
Australian Energy Producers says compulsory sales and the Government’s planned surplus on the east coast could crowd out smaller companies already producing gas for Australian customers.
“Producers should not be forced to sell gas below cost or on non-commercial terms,” chief executive Samantha McCulloch said on September 10.
WA requires major liquefied natural gas exporters to reserve gas equivalent to 15 per cent of their exports for local use. They can meet that commitment over a project’s life rather than supplying 15 per cent each year.
The energy users’ association says the policy has supported WA industry, but calls the Federal draft a “missed opportunity”. It wants annual requirements for gas actually supplied to the State, without making exporters meet overlapping State and Federal rules.
Consultation closes on September 24. The Government plans to introduce legislation later this year, with Federal supply obligations due to begin in January 2028.
Originally published as Manufacturers: Gas carve-outs could mean top-dollar bills or ‘closing operations permanently’
