ACCC chairman Rod Sims said if more businesses start to fail, then the pressure will mount on state and federal governments to act to reduce gas prices.
ACCC chairman Rod Sims said if more businesses start to fail, then the pressure will mount on state and federal governments to act to reduce gas prices.

NSW gas crisis threatens to shut down businesses

COMPETITION tsar Rod Sims has warned that the east coast gas crisis will force more businesses to shut down unless prices are reduced from elevated levels.

Earlier this year Seven Hills plastic cup manufacturer RemaPak and Queensland paving maker Claypave were forced into voluntary administration due to skyrocketing gas bills.

Dow Chemical has now joined this list, with the multinational announcing on Tuesday that it had closed its Altona manufacturing plant in Melbourne.

ACCC chair Mr Sims said an investigation by his organisation into gas prices had found that commercial and industrial gas users in Australia will pay more than $9 per gigajoule for gas this year, with some paying more than $11 per gigajoule - an unsustainable price which will kill business.

"Commercial and industrial gas users have been telling us for some time that at those gas prices, their operations are not sustainable in the medium to longer term," he said.

"Many other manufacturers are close to making critical decisions on their future operations. If wholesale gas prices do not soften, it is just a matter of time before they follow Dow, RemaPak and Claypave."

Mr Sims said if more businesses start to fail, then the pressure will mount on state and federal governments to act to reduce gas prices. He urged gas exploration companies to find new sources of gas to help fix the supply issue which is plaguing the east coast.

"Producing additional gas in the south is likely to result in much better pricing outcomes for domestic gas users than transporting gas from Queensland or importing it through an LNG import terminal," Mr Sims said.

"I urge state governments to play their role in providing access to gas resources by adopting policies that consider and manage the risks of individual gas development projects, rather than implementing blanket moratoria and regulatory restrictions."

Federal resources Minister Matt Canavan said the only way to solve the east coast gas crisis is to develop more supplies of lower cost gas.

"The higher gas prices in southern Australia are the function of two things. First, the Bass Strait resource has declined in quality and quantity, pushing up costs and, second, the coal seam gas from Queensland that has replaced reduced production from the Bass is a higher-cost form of supply, especially after transport costs," he said.

"Without extra gas development, there is no sustainable way to maintain the existing footprint of our manufacturing sector. Thousands of jobs rely on state governments developing their gas resources."

One major gas project in Australia which is awaiting approval from the NSW Department of Planning is Santos' Narrabri gas project in north western NSW.

The oil and gas company is proposing to drill up to 850 coal seam gas wells in and around The Pilliga region, with CEO Kevin Gallagher saying yesterday that it will supply half of NSW's gas needs.

"If it is approved, Santos has given an undertaking that 100 per cent of Narrabri gas will go to the domestic gas market," he said.

"That's enough gas to supply up to half of NSW' needs."

Mr Gallagher said the recent federal election result shows that the "silent majority of Australians" want jobs, small business opportunities and thriving regional communities.

"They know that, while the world is changing, industries like resources and energy, and tourism and agriculture, are still the foundation stones of Australia's strong economy," he said.

Mr Gallagher said he was hopeful the NSW government would make a decision on the Narrabri project before Christmas.

"We need government approvals … we, and our customers, need investment and supply certainty, and we are all hopeful that a decision will be made later this year," he said.