Gas users need to get used to higher prices, BG chief says

A propane chiller arrives on Gladstone's Curtis Island for the QCLNG project.
A propane chiller arrives on Gladstone's Curtis Island for the QCLNG project.

BG Australia chairman Catherine Tanna has urged a rational approach by gas users to the domestic gas debate, rejecting claims that gas is unavailable in the eastern Australian market.

BG Group is a partner in the QCLNG project on Gladstone's Curtis Island. When that project begins next year, analysts have warned domestic gas prices will jump from $4 a gigajoule to $12.

Ms Tanna told the Australian National Conference on Resources and Energy in Canberra that homes, shops, restaurants and similar commercial users had and would continue to have a secure and contracted supply.

"Gas is available and some gas users are getting on with securing that gas," she said.

Ms Tanna, a former Gladstone woman, said that when large industrial users said gas was unavailable, they were often really saying they could not contract gas at a price they wanted to pay.

"Often, these users want to pay an historically based price which, of course, has been relatively low," she said.

"However, prices today reflect different cost structures from those of a decade ago.

"These costs are driven by factors that include greater complexity in gas production, increased environmental obligations and conditions on producers and, particularly, rising construction and labour costs in the resources sector."

On calls for a domestic gas reservation policy, Ms Tanna said research showed that countries which suppressed the wholesale price of gas and directed it as subsidised energy to industry experienced shortages because of a lack of incentive to explore for gas.

Ms Tanna said the public debate needed to be shaped by a clear understanding of the forces transforming the market.

"We should not manage for imagined problems and we should not manage for the gain of a few," she said.

"Instead, the focus should be on challenges facing industrial gas users."

In May Manufacturing Australia said almost 200,000 Australian jobs could be lost and $28 billion in economic value wiped out if governments failed to intervene to ensure competitively priced gas remained available.

The organisation, a business coalition of some of Australia's largest manufacturing companies, believed a gas supply crisis was about to hit Australia's east coast because gas currently devoted to domestic manufacturing was being diverted to export.

It said a report had found this was leaving Australians to pay one of the world's highest gas prices despite having one of the world's largest supplies.

Topics:  bg group business curtis island gas gladstone lng qclng

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