Eric Perez, Australian Aluminium Council: Meeting Customer Energy Needs: What Does Industry Need...
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Transcript of Eric Perez, Australian Aluminium Council: Meeting Customer Energy Needs: What Does Industry Need...
1 Australian Aluminium Council Ltd. www.aluminium.org.au
East Coast Gas Outlook 2013
Meeting Customer Energy Needs:
What Does Industry Need From Energy Policy?
Eric Perez - Australian Aluminium Council
22nd October 2013
2 Australian Aluminium Council Ltd. www.aluminium.org.au
Presentation Overview
1. What does a customer need from an energy market?
2. The customer – Australian Aluminium Industry.
3. Outlining the energy policy mix in Australia.
4. Are Australia’s energy markets working?
5. Policy tensions and the role of government.
6. Conclusions.
3 Australian Aluminium Council Ltd. www.aluminium.org.au
1. What does a customer need from an energy market?
A deep and efficient domestic gas
market.
• close contracts for supply over
investment timeframes.
• pro-market, not anti-market.
How do we get there?
• multiple measures.
• stimulate supply.
If we don’t?
• fuel switching, lost investment,
lost value.
4 Australian Aluminium Council Ltd. www.aluminium.org.au
1. What does a customer need from an energy market?
What do Australian domestic gas
customers see?
Few suppliers.
Complex market.
Clear squeeze points in future supply.
Suppliers participating as buyers.
Poor information on supply and price.
Government involvement.
5 Australian Aluminium Council Ltd. www.aluminium.org.au
2. The customer – Australian Aluminium Industry.
Newcastle
Adelaide
Alumina Refineries
Bauxite mines
Aluminium Smelters
Kwinana Pinjarra
Wagerup Worsley
Boddington Huntly Willowdale
Portland Geelong
Bell Bay
Gladstone
Weipa Gove
$50b+ Industry
Capital
Value
Over
16,000
Regional
Jobs
50+ yrs Ongoing
Investment
$9.3b Exports
Alumina &
Aluminium
Value
Adding
Industry
Regional
Presence
A key player in Australia’s
economic past & future…
6 Australian Aluminium Council Ltd. www.aluminium.org.au
2. The customer – Australian Aluminium Industry.
Western Australia Eastern Australia Northern Australia
Australian Natural Gas Markets
7 Australian Aluminium Council Ltd. www.aluminium.org.au
2. The customer – Australian Aluminium Industry.
Alumina refining is energy
intensive. Alumina refineries are
large users of Australia’s natural
energy resources, namely gas and
coal.
ENERGY SOURCE USAGE (TJ per annum)
Natural Gas 147,561
Black Coal 42,034
Fuel Oil 23,411
Electricity 6,370
Diesel 1,169
2/3 of the energy used by
alumina refineries is gas
dependent.
8 Australian Aluminium Council Ltd. www.aluminium.org.au
2. The customer – Australian Aluminium Industry.
0
20
40
60
80
100
120
140
160
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Gas
Diesel
Fuel oil
Electricity
Coal
Fuel Usage Trends in Alumina Refining P
J p
er A
nn
um
9 Australian Aluminium Council Ltd. www.aluminium.org.au
3. Outlining the energy policy mix in Australia.
CSG restrictions
– will impact on
the NSW
community and
manufacturing.
NSW Gas
Policy
QLD Gas
Policy
Complete focus
on LNG export
and ongoing
unconventional
gas exploration.
10 Australian Aluminium Council Ltd. www.aluminium.org.au
4. Are Australia’s energy markets working?
The simple answer is no.
Not enough suppliers.
Limited contracting opportunities.
Pricing.
Supply of gas for domestic use.
11 Australian Aluminium Council Ltd. www.aluminium.org.au
4. Are Australia’s energy markets working?
Desired Outcome
Possible Policy Mechanism
Increased gas supply to the domestic
market
National interest test.
Increase unconventional gas exploration.
Remove policy impediments to increased domestic
supply.
Stop warehousing and apply to new reserves.
Greater diversity of suppliers
Remove joint marketing arrangements.
Consistency of gas policy
Policy coordination needed to improve gas supplies
entering the domestic market.
Role for the Standing Council on Energy and Resources.
Pipeline capacity available to meet
incremental domestic demand growth
Maintain third-party access rights for new gas pipelines.
Greater market transparency
Establish a gas price index.
12 Australian Aluminium Council Ltd. www.aluminium.org.au
4. Are Australia’s energy markets working?
West Australian Gas – Not a functioning market
Highly concentrated market.
Local gas prices are high.
Contract provisions are hard to secure
15% reservation policy.
13 Australian Aluminium Council Ltd. www.aluminium.org.au
4. A Threat to Investment?
Source: ABS 2011 via DomGas Alliance 2012
WA Petroleum Exploration Expenditure ($)
14 Australian Aluminium Council Ltd. www.aluminium.org.au
5. Policy tensions and the role of government.
Recognise the important role of domestic industry.
Competitively priced energy needed in order to enhance
Australia’s domestic and export growth potential.
Recognise the impact of energy policy.
15 Australian Aluminium Council Ltd. www.aluminium.org.au
5. Policy tensions and the role of government.
What is the “proper” role for Government - commercial
participant or regulator?
Market participant.
Investor.
Regulator.
16 Australian Aluminium Council Ltd. www.aluminium.org.au
6. Conclusions
Domestic gas market users have opted to become more actively involved in the
identification of why the market is illiquid.
Gas supply may be insufficient to avoid constraining domestic use;
Each petajoule of gas shifted away from industrial use towards exports
means giving up $255 million in lost industrial output for a $12 million
gain in export output. That is, for every dollar gained $21 is lost;
Secure local gas supply is fundamentally important to a number of
industries including non-ferrous metals and basic chemicals, plastics,
pharmaceuticals and paints;
Gas exports are predicted to rise from 2 million tonnes in 2015 to up to 24
million tonnes in 2023;
17 Australian Aluminium Council Ltd. www.aluminium.org.au
6. Conclusions
Long term gas supply contracts have evaporated for local industry as a
consequence of export commitments;
East coast gas prices will rise; and
Current policy settings favour exports over domestic gas sales.
Large Scale Export of East Coast Australia Natural Gas: Unintended consequences
Australian Industry Group and
Plastics and Chemicals Industry Association
October 2012
18 Australian Aluminium Council Ltd. www.aluminium.org.au
6. Conclusions
Australian Domestic Gas Market…
Gas is a commodity but also an input.
The market is based on Government intervention… and fails
most measures of an efficient market.
Create an efficient domestic gas market.
Then, we let the market do its work… to maximise the value
from energy rather than the value of energy.
19 Australian Aluminium Council Ltd. www.aluminium.org.au Australian Aluminium Council Ltd. www.aluminium.org.au
Thank You