A long-standing Victorian methanol plant is the latest to shut up shop and move to the United States of America, where gas is cheaper and supply more certain.
The Australian Financial Review this week reported how the Finkel Review recommendations to increase Australia’s gas supply and reduce prices was “too little too late” to save the Coogee Chemicals methanol plant in Melbourne’s west.
The owners of the plant did not want to move. Higher prices and uncertain supply have driven them out.
This is not the first Australian manufacturing business to make such a decision – and it won’t be the last according to representative group Manufacturers Australia. Fertiliser manufacturer Incitec Pivot also made the decision to avoid Victoria and go to the USA for its new plant.
In fertiliser and in methanol, natural gas is the essential key ingredient. And the market for natural gas on Australia’s East Coast is very tight. ‘Easy’ gas from Bass Strait is no longer as cheap as it was for decades. It is less plentiful now and more difficult to extract, meaning the price has gone up.
There is also a new export liquid natural gas (LNG) industry operating in Queensland and this is drawing gas from South Australia and Queensland – the alternative sources for gas users in Victoria and NSW.
Tight supply and a new export industry have added to price pressures. Lack of alternative sources has meant there is nothing to keep downward pressure on prices.
As the gas industry has been saying for years, new onshore sources for gas are needed urgently on Australia’s East Coast. The good news is there are plenty of gas sources available in NSW and Victoria.
Gas companies are willing to invest.
However, pro-Green, anti-development policies in both States have meant these substantial reserves have stayed in the ground.
Now these anti-development policies, leading to a supply crunch, are threatening to curb the flourishing LNG export industry from Queensland – an enormous investment of great immediate and longer term export income and royalties for the Queensland Government and taxes for the Commonwealth.
But, as we point out here that position is under unprecedented policy pressure from a Federal Government desperate to deliver domestic supply security but unwilling to force the States to play their part.