Analysis suggests economic recovery should not be cooking with gas

Analysis suggests economic recovery should not be cooking with gas

“Gas exploration companies drill in the most prospective places, and only explore in less-attractive fields or in deeper waters once better sources have been exhausted or if gas prices are very high.

“Where once gas could be supplied for $4 per gigajoule or less, today eastern Australian gas fields will struggle to supply gas for less than $6 per gigajoule.

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“Existing fields can supply gas at $4 per gigajoule for a period – as has occurred on Australian spot gas markets for much of 2020 – but at these prices producers are not earning a return on past capital expenditure, and cannot justify developing new fields.”

The report’s authors, Tony Wood and Guy Dundas, argue that, even if the government could decrease prices, the benefit to manufacturing is overstated.

They say the companies that would benefit most contribute only about 0.1 per cent of gross domestic product, and employ only a little more than 10,000 people. Further, most are in Western Australia, which has low gas prices already.

The report argues the government should do more to support the development and deployment of the low-emission alternatives that can replace natural gas in manufacturing, such as renewables-based hydrogen and renewables-based electricity.

Energy and Emissions Minister Angus Taylor said the government believed the analysis of gas’ impact on the manufacturing sector was narrow and oversimplified.

“The joint ministerial roundtable held last week showed how important gas is to the manufacturing sector more broadly, not only to facilities that use gas as a feedstock.

“The government does not agree with conclusions drawn in the report, particularly in relation to the impacts on the manufacturing sector jobs and the role of gas-powered generation.”

The report also says that because electricity is already cheaper than gas in most areas on Australia’s east coast, and as coal fired power stations closed would create less emissions: governments in NSW, ACT, QLD and SA should ban new homes from being connected to gas.

It says that while the existing gas network may in future use low emissions alternatives, such as hydrogen or biomethane, those fuels are likely to be expensive.

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The Australian Petroleum Production and Exploration Association chief executive Andrew McConville said via a statement the group rejected the report’s assertion that increased cost of gas would shrink demand, citing other sections of the IEA’s outlook showing growth in Asia until the 2040s.

He said the gas-fired recovery was not just about manufacturing, but about “regional jobs, international trade and major infrastructure investment.”

“Gas will continue to be a significant provider of reliable, stable and lower emissions energy to the Australian economy for decades to come,” the statement said.

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