Manufacturing should leave Australia

I’ve tried my hardest but have failed and the result us upon us, at the AFR:

A gas price cut is required for Queensland’s Gibson Island fertiliser plant to avoid closure this year, with owner Incitec Pivot urging the re-elected Morrison Government to ensure gas was ”available and affordable” for Australian manufacturers.

Uncertainty over the future of Gibson Island’s 430 jobs comes after Queensland voters strongly endorsed the Coalition in last week’s federal election, with many pundits speculating that vote was linked to the Coalition’s support for blue-collar jobs in Queensland such as those promised by Adani’s Carmichael coal project.

…Gibson’s Island’s 2019 gas bill is expected to be $49 million higher than last year, under the terms of a one-year gas-supply deal that is believed to have increased prices by more than 70 per cent and was designed to buy time for negotiation of a longer term gas deal.

According to the Morrison Government’s own gas reservation policy (the ADGSM), the current price of gas on the east coast should be $6Gj but it is $9Gj instead:

Yet there is no enforcement by the Government or the ACCC of the ADGSM agreement. Both are presumably captured by the gas cartel.

I now believe that the next step in the destruction of Australian energy markets under the re-elected ScoMo Government will be LNG imports as the ADGSM is declared a failure. By comparison, LNG imports would today have the local gas price at $10Gj.

And these are just spot markets. Contract markets never moved lower than $10Gj and will not do so under the new government because:

  • the LNG import premium will become the marginal price setter as the ADGSM fails;
  • the good news is the imports will also cap the extent of the local gas price gouge;
  • but as the AUD falls through the 2020s, the LNG import price will rise substantially anyway despite a persistent Asian gas glut;
  • new sources of local supply will also go offshore as the unfilled excess capacity of Curtis Island vacuums it up, and
  • this will ensure electricity prices continue to rise as well.

The Australian gas market has collapsed and electricity is right on its heals. Any energy-intensive manufacturer that can make a business case to shift production to a low cost energy cost country (such as the US) and import product into Australia should do so.

Comments

  1. Yes, it is every man and company for themselves…….the closest to the gov. will get the subsidies that will be essential for energy supply at all levels going forward. We will be going without other things to ensure that energy keeps flowing as the energy cost of energy slowly strangles us.

    Everyone needs their own system because us peasants won’t be getting the big subsidies

    https://enphase.com/en-us/ensemble

  2. Australia: shooting itself in the economic and environment feet, whilst saying it’s thinking about it’s hip-pocket, and gloating about it like it achieved something else…. crikey, we are a bunch of dunder-heads…

  3. HadronCollision

    Hilarious

    LNP the party of business.

    It’s just all too funny.

    Business should fkoffski to WA, heh

      • HadronCollision

        Brighte.com.au
        Get yourself interest free loan for big fkoff PV + Battery set up.

        Chr!st on a stick what a mess

        Appreciate your work MB

    • Get a NAIF grant and set up (grasp) a mega PV and wind farm to turn water into Hydrogen and Oxygen, then use it as feedstock in place of gas. That will get a few more jebs going.

    • Yep. The factories should simply move to WA (which has gas reservation).

      I just wonder what the price of electricity is in WA.

    • ”LNP the party of business.”
      Business as they see it is nothing more than crony capitalism and house/land price inflation. ie a recipe for a 3rd world country if you add their lack of social responsibility to the mix

  4. GunnamattaMEMBER

    Any globally exposed producer of anything should probably be thinking about when to leave Australia.

    We offer

    About the world’s most expensive employees
    About the world’s most expensive land costs
    And
    About the world’s most expensive energy costs

    • The battle over gas prices is interesting.  

      AN producers split methane CH4 => CO2 + H, to then make ammonia N + H => NH4, and then on to ammonia nitrate NH4NO3.

      They are aching to replace this first stage of splitting CH4 with Hydrogen electrolysis – electrically dividing H20 into O + H –  both to free themselves from gas and to reduce their very large volumes of CO2 emissions. 

      Test H plants are going into the production complexes of major H users. 

      https://www.hydrogenics.com/2019/02/25/hydrogenics-to-deliver-worlds-largest-hydrogen-electrolysis-plant/
      http://www.itm-power.com/news-item/worlds-largest-hydrogen-electrolysis-in-shells-rhineland-refinery

      However, these are pilots.  The Hydrogenics plant for Air Liquide in Ontario is 20MW, producing 3000 tonnes of H a year.  Shell’s 10MW demonstrator is to produce1300 tonnes pa.  IPL Gibson Island would need an H plant magnitudes larger.

      While Australia produces electricity from coal and gas, Hydrogen electrolysis makes no environmental sense.  And with expensive gas the marginal price setter for electricity, the energy cost is prohibitive. This equation shifts steadily as more cheap renewables are added to the electricity mix, as is happening,

      The question for Gibson Island is, can it bridge the high gas prices in its wait for economic electrolysis?

      • While Australia produces electricity from coal and gas, Hydrogen electrolysis makes no environmental sense. And with expensive gas the marginal price setter for electricity, the energy cost is prohibitive. This equation shifts steadily as more cheap renewables are added to the electricity mix, as is happening,

        Could you not put a giant solar array near the Karatha LNG plants? Must be some of the best sunlight in the world there.

    • Ronin8317MEMBER

      Wages and land cost can go down with the AUD (40c, here we come!!), however energy cost will always be in USD, so we’re screwed.

    • The wages are probably higher in Norway, Holland, Switzerland.

      Electricity may be cheap in WA – which has gas reservation – and that is where the factories should relocate to.

      Jay Weatherill could have abolished rural growth boundaries in SA to make SA a state of affordable housing but he loves the real estate bubble and he failed to build an electricity transmission line from WA to SA.

      I wish solar panels cost $10 each but they are not and coal is still competitive.

  5. I’m currently working on a estimate to relocate reusable parts of a large manufacturing plant to sister divisions offshore. One of those what if estimates, and you do the estimate and sometimes nothing is heard any further. I would love to say more but I have to keep my job. All hush hush, project team lawyer/contract manager have strict confidentially deeds being enforced on subbies before I can send work packages out for quotation, if news leaks out it will be thru them. The rest of the plant will go as scrap.
    I had of hoped management had of made the decision of closure on the eve of the federal election.

    • I don’t think your the only ones from what I hear. We seriously are the dumb/corrupt country. We could do so much, yet opt out. I might opt out of Oz soon than I thought

      • Actually its a difficult job I am doing, all I am allowed to give the oversized heavy haulage companies is the dimensional data (length width, height and weight – no description of what it is) of the gear being salvaged and the approximate geographical pick location on the East Coast so they can price road transport to the port where the breakbulk ship will pick it up (at least they know the port!).
        They had them sign confidentially deeds, but then don’t want to tell the transport subbies the pickup address and they start thinking its someone else nearbly! They are covering their tracks by going thru a consultant to do the costing.
        People in the industry who price these jobs like to know a bit more as it costs them money to quote.

    • Yep, it’s real…it seems that as long as sheeple can buy Utes, go on hols, flip house, and build dog boxes, farm people, etc, then we think everything is rosy…but the ass is talking out if the place, and it’s getting worse…

      I told my eleven year old yesterday to consider can STEM career and leave the country; he agrees. The day before I agreed with a 18 year old STEmer that he should do the same. This is real, and we are stubbornly running at cliffs…

      • Reverse it. It’s why utes and f.g flipping is all there is. No energy for you! (Soup na4i inflection)

      • Snotty Millenial

        Current Engineering student here. About to graduate but im on the upper end of the millenials (29) as I started late. I’ll probably be ok because I have some experience and know people, but I really feel sorry for my younger cohort who are optimistic after what they read in the university brochures but still totally naive about the state of things Australia.

        I’ve honed some useful skills while still in uni to at least have a leg up but Im looking for any chance I get to get the hell out of here. No one with serious skills stays in Australia, unless they’ve managed to find some sort of underserved niche. The recent election was the final nail. The destruction of any kind of “clever country” is all but complete, and any kind of massive plan to restore it, which would take a decade or more and require actual leadership and vision. Can you see that ever happening? Australia has gone to the dogs and its decline continues

    • Urea granulation plant at Gibson Island is modular…….but think of the CO2 that will be vented if they try to keep the ammonia plant going.

  6. It’s why APRA were always going to wave the white flag with duopoly support. What a mess.

  7. This is just the LNP climate policy platform. Make energy as expensive as possible. Much easier to push money/debt around and create ‘velocity’. It makes for good gdp numbers and zero emissions to boot!

  8. I wonder how many Gibson Island employees who seem to be about to loose their job voted for the LNP or Palmer last weekend?

      • Not so sure, there might have been a last minute reprieve courtesy of strings being pulled behind the scenes thru the efforts of ALP Senator Kim Carr.
        The Libs won’t even attempt to save it

  9. The problem is now you have a party in power that only thinks that power prices are high because of renewables and it can be all solved with coal. Reducing prices by strengthening the ADGSM (a Turnbull initiative) goes against everything they stand for.

    • Problem is now we have a government who does not want to see gas prices drop.

      The whole business case model of Snowy Hydro 2.0 and the new pumped hydro one being build by Origin Energy on the Shoalhaven in NSW assumes gas prices remain where they are.

      If gas prices fall, these investments don’t justify themselves.