Gas usage to double by 2015

Gas consumption is set to more than double in the period up to 2015 according to research undertaken by the Australian Bureau of Agricultural and Resource Economics and more recently by the Australian Gas Association.

Natural gas is also projected to increase its primary energy share ranking from third to second place.

While ABARE and the AGA differ slightly on the projected numbers – ABARE projects annual growth in the gas sector of 4.3 per cent compared with the AGA’s 4.1 per cent – both expect the gas industry to play a more prominent role in mapping Australia’s energy supply and consumption.

The annual growth rate of the gas industry is forecast to be more than three times the growth of the energy market overall.

By 2014-15, ABARE and the AGA expect the gas industries share of the primary energy market to be 28.9 and 26.4 per cent respectively.

The AGA report Natural Gas Consumption in Australia to 2015-Prospects by State, Industry and Sector concluded gas consumption growth of 854.8 petajoules to 2014-15 will be largely underpinned by WA, where growth is expected to be 26.8 per cent, and Queensland with growth of 33.2 per cent.

Most of the demand will be for electricity generation. Demand for this sector is expected to grow 46.5 per cent to 2014-15 while demand by industry, including mineral processing, will increase 38.6 per cent.

This will push the gas industry’s share of energy markets to 22 per cent by 2005 and 28 per cent by 2014-15 – up markedly from the current share of 17.7 per cent.

The AGA has identified key growth areas including power generation, the industrial and residential

sectors, the LNG export market, gas cooling and the transport sector.

Among the aims set out in the AGA’s Gas Industry Development Strategy 2000-2005 is the desire to work closely with peak industry bodies and government to promote the environmental, social and resource benefits of natural gas.

Barriers to growth in the Australian gas industry outlined in the strategic plan include the abundance and low cost of coal for power generation.

Barriers also exist that hamper efforts to raise Australia’s liquefied natural gas market share.

The strategic plan says the international attractiveness of Australia as an investment option in large, long-life projects is affected by taxation reform.

“Proposals to weaken capital allowance provisions as part of the Ralph Review of Business Taxation could see investment opportunities, such as the LNG expansion plans, lost to overseas competitors,” it says.

“A comparison with the company tax and depreciation rates of foreign suppliers highlights that Aust-ralia’s current taxation regime may place Australia’s LNG industry at a competitive disadvantage.

“The majority of such suppliers have a corporate tax rate that is below 30 per cent and a write-off period of five years or less.

“Uncertainty surrounding the new taxation regime as it applies to the resource sector places expansion of Australia’s LNG industry in doubt.

“While bigger projects may be able to secure favourable arrangements, it is the smaller projects which may become less economically viable.”

The report says the AGA seeks to promote the expansion of the LNG industry through a policy framework that will guide government.

The framework calls for government to provide a taxation regime that includes competitive capital allowance for long lived assets, a workable land access and native title process, no export restraints and recognition of the greenhouse benefits resulting from gas use.

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