For years MB has questioned whether the liquified natural gas (LNG) boom will actually be beneficial to Australians, who in the absence of a domestic reservation policy will be forced to endure rising domestic gas prices as most of the bounty from LNG exports flows offshore.
One vocal critique of Australia’s energy policy is Dow Chemicals CEO, Australian-born Andrew Liveris, who way back in 2013 warned that Australia risked destroying its manufacturing sector by exporting too much gas to Asia:
Dow Chemicals would open its cheque book for big-ticket value-added manufacturing projects in the country if it could source cheaper gas, which he said should not simply be shipped to export markets without allowance for domestic markets…
Mr Liveris is particularly vocal on energy policy… He is a strong supporter of domestic gas reservation, in which cheap domestic gas supplies help buttress a domestic manufacturing base. The US has seen manufacturing and jobs pick up thanks to the extraordinary gas boom, which has turned US the energy market on its head…
He says despite an abundant supply of gas, Australia has simply let oil and gas majors charge the domestic consumer a world oil price equivalent, which helps kill manufacturing…
“Every (US) dollar of input of their gas is going to create $US8 of output. Every job in the oil and gas sector, I will create five jobs downstream.
“It’s one of the reasons why I think Australia is a great opportunity to do value add.”
Today, Liveris has returned once again urging the Australian Government to reserve some low cost gas for advanced manufacturing:
Rather than burning gas for energy, the economic impact of petrochemicals could multiply by converting them into products such as hi-tech materials.
“It needs some degree of government policy on how to take some of those low-cost energy building blocks and create a market in Australia for the domestic sector,” Mr Liveris said.
“Once we can do this, we believe one-third of our economy could be transformed in the advanced manufacturing context. This is where the Internet of Things, smart materials and low-cost feedstocks can create a competitive advantage that will take the advanced manufacturing economy of Australia from less than 10 per cent today to over 30 per cent.”
That, he said, would have a knock-on effect on government revenues, with manufacturing multiplying the revenues generated out of oil and gas exports 20-fold…
“For every job in the energy sector, eight jobs are created around it in the supply chains when you value-add.
“For me, this is a no-brainer, it’s low-hanging fruit.”
Liveris’ call has received support from Brickworks chairman Rob Millner, who has called for a gas reservation policy “if we want to keep manufacturing going”.
Unfortunately, Liveris’ and Millner’s advice is likely to fall on deaf ears within the government, who would rather let the “market” sort things out.
In the meantime, every dollar earned from exporting gas to Asia is very likely costing Australia much more in lost value-added local production.
So much for creating a “clever” and “innovative” economy. How about a “hollowed-out” economy instead:
