As mining industry heavyweights gathered in NSW, Federal Resources Minister Ian Macfarlane issued a warning to the state.
You are facing a shortage of gas.
Each day drilling for coal seam gas (CSG) was idle inched NSW closer to thousands of job losses across the state, he said last week.
But critics say the industry has concocted an artificial crisis.
They say exports, not lack of production, will drive prices up and cost jobs.
This week the Australian Petroleum Production and Exploration Association (APPEA) released a Deloitte Access Economics report into the economic impact of domestic gas reservation.
The practice, which is already in place in Western Australia, sets aside a percentage of all liquid national gas (LNG) from export projects for domestic use.
But while it would protect Australians from heavy price hikes, the Deloitte report - which was commissioned by the industry body - said an east coast reservation could severely hamper opportunities for national growth.
At the moment, domestic wholesale contract prices on the east coast are currently around three to four dollars per gigajoule of gas.
By 2020, however, these prices are set to balloon to $7.30 per gigajoule on the east coast and $9.10 on the west coast.
While some of this can be put down to an escalation in production costs, others are attributed to the expansion of Australia’s LNG export industry, the report says.
Current prices in Japan, for example, are around $15 per gigajoule. So as Australia’s gas prices blow out to meet export prices, domestic consumers will feel the hit.
But a reservation, the report states, is not the answer.
‘‘There would be winners ... but the gains to these winners would not offset the direct losses to producers and the broader losses that emanate from this,’’ the report states.
In short, it projected that a reserve on the east coast would cost the Australian economy $6 billion in forgone GDP at 2025.
Manufacturing Australia says that without any government intervention from exports almost 200,000 jobs could be lost.
In a report released by the business coalition this year, it predicted that Australia’s LNG exports would increase from about 20 million tonnes annually to more than 63 million tonnes by 2017.
Without intervention, the shortage of supply and the ‘‘price shock’’ could kill off almost 10 per cent of manufacturing jobs and transform gas ‘‘from a strategic asset to a liability for domestic users’’.
NSW Greens MP Jeremy Buckingham said both the state and federal governments could be facing an electoral backlash if reservations weren’t put in place on the east coast.
‘‘Barry O’Farrell came to power promising to keep energy prices low,’’ he told AAP.
‘‘Well the gas price rises that are coming in the next two to three years are solely because the federal government and the state government have allowed the development of the export industry.’’
Mr Buckingham pointed to comments by gas giant BG Group Australia on Friday which said there was no shortage.
In a speech to a conference in Canberra this week, BG Group chair Catherine Tanna reportedly said: ‘‘Gas is available, it may not be at a price that matches historical prices, but it is available’’.
Mr Buckingham said it was just another sign that parts of the industry had invented a ‘‘phantom crisis’’.
‘‘No other gas exporting country in the world allows unrestricted gas exports,’’ he said.
‘‘Governments should address the problem created by unrestricted LNG export through sensible regulation of the gas market.’’
AGL told AAP in a statement on Friday it was too late for a gas reservation policy to have any impact in NSW.
‘‘The only way to apply downward pressure on gas prices is to secure more supply.’’