Thousands of job losses have been announced in Australia in the past year, but the numbers will pale by comparison to what lies ahead due to high gas prices, according to major manufacturers.
The association representing Australian manufacturers believes more than 100,000 jobs will be lost unless the Federal Government intervenes to solve an increasing gas shortage that is pushing up prices for households and heavily job-laden industries.
The irony is that Australia is producing more gas than ever, and is on track to become the world’s largest exporter of gas, with contracts to supply fuel-starved Asian markets prepared to pay triple the prices Australians do for energy.
The manufacturing industry says it wants a system similar to the US where gas is not exported unless it first meets a national interest test.
Manufacturing Australia chairwoman Sue Morphet says major companies that survived the GFC are now under pressure to move their manufacturing offshore.
“It could cost our GDP about $28 billion and 100,000 direct jobs, plus all the indirect jobs for people that service the manufacturing sector,” she said.
Building products company CSR says Australia agreeing to triple its gas exports is a big issue.
“Nobody quite understood that would mean there wouldn’t be enough gas available post-2016 to support local industries like this one,” CSR managing director Rob Sindel said.
After about 30 years of melting raw materials to make glass, CSR is closing its plant in Ingleburn in suburban Sydney, retrenching 150 staff.
It says the shutdown is caused by rising energy bills due to the cost of gas – the life blood of the smelter.
“Factories like this they just can’t support that additional impost,” Mr Sindel said.
“The saddest part is the 150 people who worked here. It’s not only their jobs.
“Those 150 people supported a family, supported a community, and now they are out looking for employment.”
The saddest part is the 150 people who worked here. It’s not only their jobs. Those 150 people supported a family, supported a community, and now they are out looking for employment.CSR managing director Rob Sindel
But David Byers, the CEO of the Australian Petroleum Production and Exploration Association (APPEA), says the gas industry represents a “big opportunity for Australia”.
“We have $200 billion of investments underway now, so this is destined to be a huge boost to Australia’s GDP over the next 20 to 25 years,” he said.
Australian manufacturers disagree. The head of global chemical giant Dow, Andrew Liveris, is one of Australia’s most successful business exports.
Born in Darwin, he is now co-chairman of US president Barack Obama’s Advanced Manufacturing Partnership and chairman of the US Business Council.
“Our Dow Australia factories here in Melbourne are seeing a doubling of gas prices when our contact expires here this year, which is going to render them pretty uncompetitive,” Mr Liveris said.
Along the east coast, manufacturers say big gas producers are now cutting back gas supply contracts for local industry to hoard gas for export.
It is a trend that has increased as huge new LNG shipping facilities off Gladstone in Queensland get closer to completion.
Gas producers deny the claims and say it is a smoke screen. APPEA says the market is working.
“What we have from Manufacturing Australia is a protectionist proposal, which is trying to have gas supplied at lower prices, at the expense of the gas production industry,” Mr Byers said.
“It’s a form of protectionism that Australia moved away from back in the 60s and 70s.”
Asked if he was exaggerating the plight of Australian manufacturers to push down the price his company pays for gas, Dow’s Mr Liveris replied: “Why should Australia pay Japanese prices for it’s gas?”
“The Australian consumer should see the benefit of abundant supply,” he said.
“It’s not a question of who’s telling the truth and who’s not. I just ask anyone to look at the facts of domestic markets around the world.”
Mr Liveris says the situation is different in America.
“On gas, the department of energy by rule of law has something called ‘the public interest’. It will not export gas unless it’s in the public interest,” he said.
Unlike Australia, gas exports from the US have been strictly limited, he says, “to 10 per cent of available supply”.
The [US] department of energy by rule of law has something called ‘the public interest’. It will not export gas unless it’s in the public interest.Dow CEO Andrew Liveris
“That doesn’t affect domestic pricing. You can export a piece of it and you can keep a lot of it home to have the 20 times the multiplier occur,” Mr Liveris said.
“One dollar of gas creates $20 of value add. One job [in gas production] creates eight jobs [in manufacturing].
“Now that is a powerful domestic force. And these are high tech, high value jobs. I think Australia can have this.”
Manufacturing Australia is calling for a similar national interest test to the US.
It points out that Western Australia has already adopted a policy preserving 15 per cent of its gas for use in that state.
But gas producers remain fiercely opposed.
“This is an interference with the way that supply and demand should operate,” Mr Byers said.
“It’s an increase in costs of being able to supply into the West Australian marketplace.”
On a whirlwind visit to Australia , Mr Liveris has taken his message to Canberra.
His meetings with the Federal Government were private – but there is little doubt what stern question he raised.
“I think in this next period of time you will not like the answer, as the Alcoa’s and other companies start shutting down and you haven’t got a plan to start re-skilling your workforce to the advanced economy,” Mr Liveris said.
“I think that pressure has arrived and I think what will happen is the Government will have to respond.”