Via Domain:
Mr Power said the disruption to global supply chains caused by the pandemic presented Australia with an opportunity to re-imagine its moribund manufacturing sector.
He said that, provided the right tax and cost settings, this could include high-tech, precision design and manufacturing and the domestic, industrial-scale production of largely imported goods. A key ingredient is the supply of cheap energy to industry, he said.
“We need competitive energy prices, particularly gas, to attract large-scale manufacturing like fertiliser and petrochemicals. There is absolutely no reason why Australia can’t be very competitive with those.
“Even if we have some factors of production that are higher-cost, like labour, we can offset those with a strong domestic market and lower energy costs. I think there is great opportunity in those areas.”
Mr Power said the best way of lowering gas prices was to increase supply.
“We have significant reserves of gas on the east coast that are not connected up. We have significant reserves in central Australia and significant reserves in Western Australia. There are options to connect our major demand centres with our major supply centres.”
Great! Except that it will NOT work. We don’t just need cheaper gas than we have today, we need cheaper gas than everybody else has, otherwise, why would anybody invest here in high-energy manufacturing?
That is NOT POSSIBLE with more supply. Take a look at the where we are now with reference to the southern states gas balance with major Winter shortfalls:
Now looks at the AEMO outlook for 2024:
The Winter shortage periods are over 100Tj per day and the deficit is perpetual. And this before any manufacturing revival.
If you try to fill this deficit with imported gas then your advantage is, by definition, gone. If you try to fill it with terrestrial gas in projects like Narrabri (which is the cheapest) it will cost you $8Gj. That will very likely be more expensive than our own gas being sold in Asia via LNG:
That LNG is the last of Australia’s cheap gas feedstock, drained from SA and QLD.
The ONLY way to restore a competitive energy advantage to Aussie manufacturing is to hold back 200Pj of the cheapest gas for local consumption via reservation.
Anything else, everything else, is balderdash.
