Aluminium industry steps up gas push

The aluminium industry has ramped up its push for gas to be set aside for domestic manufacturing, calling gas a "publicly owned resource" with the government the "custodian of that resource".

Rising domestic gas prices, coupled with the inability of large industrial gas consumers to enter into long-term contracts, have left parts of the manufacturing industry exposed to increasing energy costs at a time when operations are already being pressured by the strong currency.

The increases have occurred as a large round of capital investment is under way in Queensland to launch a series of export gas projects, placing a question mark over the commitment of the gas industry to meeting domestic demand, given the higher prices achieved from exports.

As a result, parts of the manufacturing industry have become increasingly vocal in calling for gas to be reserved for domestic consumption, or for similar policies to be put in place, to ensure domestic industry will be supplied with gas.

"Maximise the value from energy rather than maximise the value of energy," Miles Prosser, an executive director of the Australian Aluminium Council, told an energy forum today. "A simple free market approach fails the interest of the public."

Mr Prosser said government intervened heavily in the energy exploration sector, providing explorers with a significant degree of protection — from the way it licences exploration activity to allowing explorers to warehouse exploration acreage prior to developing a known resource.

He also accused the gas and oil explorers' lobby group, the Australian Petroleum Production and Exploration Association, of "high-minded arrogance" in its criticism of some state governments, which have suggested auctioning exploration acreage.

"Free markets, if completely unrestrained, can produce undesirable outcomes," he said.

The strong Australian dollar coupled with low aluminium metal prices has already forced the closure of the Kurri Kurri smelter, near Newcastle, while the federal government intervened to provide assistance to one of Victoria's smelters, to ensure its survival for the time being.

The West Australian government has implemented a policy whereby 15 per cent of its gas must be set aside for domestic consumption, with some lobby groups calling for other state governments to take similar steps.

Despite the criticism from the oil and gas industry, this policy has not had any effect on the high level of exploration activity in that state, Mr Prosser said.