by Richie Merzian & Mark Ogge
[Originally published in the Newcastle Herald, 18 November 2020]
A gas-fired recovery from the economic damage caused by Covid-19 will not help the Hunter region. In fact, a gas-fired recovery will struggle to employ anyone, except the gas executives that proposed the idea. The bottom line is, creating jobs in the gas industry is expensive. The gas extraction business employs less workers per dollar invested than almost any other industry in Australia. For a government that wants to create jobs, supporting virtually any other industry would be better.
But the Federal government has continually called for a gas-fired recovery. And the argument for more gas has morphed into the idea that, because some manufacturing businesses use gas, subsidising the gas industry through a “gas fired recovery” will provide manufacturing jobs.
Let’s be clear, there is no shortage of gas for Australian manufacturing. Gas production has tripled in the last decade — it just goes overseas. In fact, a small group of global oil and gas corporations export over ten times (4000 petajoules per year) more gas than all the gas used by Australian manufacturers (373 petajoules per year).
These big liquefied natural gas (LNG) exporters use more gas just to prepare the gas for export than Australia’s entire manufacturing industry.
And, if we were serious about creating jobs the government would be looking at investing in industries that employ a lot of people. But in a new report published this week, The Australia Institute found the LNG industry employs only 4 workers for every petajoule of gas used, compared to around 760 workers per petajoule used in chemical and mineral processing manufacturing.
Interestingly, in its public statements on the “gas-led recovery”, the Government doesn’t even argue that increasing the gas production from its five new “strategic gas basins” will reduce gas prices. It’s more about the vibe. That’s probably because it’s a tough argument to make given gas prices have tripled over the last six years as gas production tripled. That’s right, despite gas supply tripling, gas prices did not go down, they went up by a lot.
And gas prices are never coming down. The LNG industry has already shipped Australia’s affordable gas off overseas, leaving only very remote and expensive gas, likely to cost over $10 per gigajoule once it’s delivered to manufacturers from these new fields. Opening up these new gas fields won’t benefit Australian manufacturers; it will just allow the LNG exporters to export even more.
If as so-called “gas-led recovery” was actually about helping manufacturing, rather than handouts to the LNG industry, the Federal Government could simply divert a tiny fraction of our existing gas from the LNG companies to manufacturers. It is inconceivable that if there was a real shortage the Federal Government would allow gas to go overseas while Australian manufacturers went without. The idea of subsidising projects like the Narrabri Gas Project and the Hunter Gas Pipeline to increase supply is a distraction from the real task of creating jobs through truly job intensive industries.
But the bigger question is whether more gas would actually increase manufacturing jobs, including in the Hunter region. New South Wales had abundant cheap gas for decades from the mid-1980s to around 2014, and yet over that entire period, manufacturing jobs in NSW declined. When gas production tripled after 2014, manufacturing jobs continued to decline.
Part of the reason for this is that the industries employing the most manufacturing workers use little if any gas. Three quarters of gas used in Australian manufacturing is used by a handful of gas intensive companies who employ just 17 percent of the manufacturing workforce.
Fortunately for the few big gas dependent industries in Australia, there are plenty of lower-cost alternatives to gas. Renewable energy with storage is already cheaper than gas for electricity. Electricity can be used instead of gas to create heat for many industrial processes. The capital cost is a barrier, but the COVID recovery spending is a great opportunity to assist industries to make the switch away from gas, which would lock in permanent ongoing energy cost and emissions savings for those companies.
At the end of the day, “natural gas” is just good marketing for what should be called fossil gas. If the Federal Government wants to address both the Covid-19 and climate crises, then it should back solutions that do both. But the best way to help the handful of gas intensive manufacturers is getting them off gas, not giving money taxpayer money to the gas industry.
Richie Merzian is director of the Climate & Energy Program at independent think-tank The Australia Institute @RichieMerzian
Mark Ogge is principal adviser at independent think-tank The Australia Institute @MarkOgge