Despite the boom in gas output in Australia don’t expect a similar revival in manufacturing as that seen in the US, that’s the message from recent research from Wood Mackenzie. Australia is increasing gas output as fast as the USA and then exporting it as LNG in order to take advantage of high gas prices in Japan.
In the US where shale extraction is driving a production boom that has led to prices falling from $13.69 per btu in July 2008 to around $4 per btu currently. In Australia meanwhile wholesale purchasers in the east of the country who paid $2.67 per btu on average over the past decade, are being asked for more than twice as much when they sign new supply contracts or renew existing ones. However with gas prices in Australia and Japan converging (once liquefaction and shipping costs are included) domestic gas prices could continue to rise – LNG for delivery to Northeast Asia over the next four to eight weeks costs $18.40 per btu.
Related article: US natural gas prices could triple in manufacturing renaissance
Australian manufacturers, who use gas to make plastics, chemicals and electricity, will be hurt by “unrestricted” LNG exports, according to Manufacturing Australia, an industry group. Incitec, a Melbourne-based fertiliser producer is building an $850mn ammonia plant in the state of Louisiana, partly to take advantage of lower US gas prices.