Gas shortage may lead to sales cut

THE Federal Government may have little choice but to curtail exports of liquefied natural gas if it wants to save manufacturing jobs, says Australia’s chief competition cop.

Australian Competition and Consumer Commission chairman Rod Sims says energy affordability has gone from “being a source of economic advantage to Australia to the opposite”.

Mr Sims said the outlook for gas supply next year now appeared worse than when the ACCC prepared its first report on the market last year.

Projected production was lower, domestic demand was higher and a significant quantity of gas was expected to be sold on the international LNG spot markets in excess of contract requirements, he said.

As well, international prices were at record lows and Australian prices at record highs.

Responding to the crisis, the Government this year warned it may intervene in the export market, using a program called the Australian domestic gas security mechanism.

If it does step in, the Government would divert gas earmarked for offshore buyers into the domestic market.

Mr Sims said the Government — which has faced criticism from the energy industry for threatening to intervene — did not have many options.

“It is easy to criticise the Australian domestic gas security mechanism,” he told the National Press Club yesterday.

“[But] consider the choices: the Federal Government may be faced with a choice of pulling the trigger on the mechanism on the one hand, or seeing factories close and jobs lost.

“I think it would be very sad to see firms fail just because our east coast gas market is dysfunctional.” The security mechanism — also known as the “gas trigger” — requires LNG projects that draw gas from the domestic market to limit exports or to find offsetting sources of gas.

The Government is awaiting a report from the ACCC into gas supply and demand, which would inform Treasurer Scott Morrison’s decision on when to pull the trigger.

Labor leader Bill Shorten said the decision to step in should be made immediately.

Mr Shorten said it was “mind-boggling” the Government was refusing to pull the export control trigger.