18/06/2008 - 22:00

Report reveals widespread impact

18/06/2008 - 22:00


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The scale of the impact of the Varanus Island gas explosion is starting to emerge, with about 50 per cent of a large sample of companies in Western Australia reporting their production is down by 30 per cent.

Report reveals widespread impact

The scale of the impact of the Varanus Island gas explosion is starting to emerge, with about 50 per cent of a large sample of companies in Western Australia reporting their production is down by 30 per cent.

The information has been revealed in the Chamber of Commerce and Industry WA's second survey, with 300 respondents offering a more comprehensive review of the state's business scene than an earlier study in the initial aftermath of the explosion.

Perhaps more concerning to the state is that those 300 businesses reported they had stood down, or stated their intention to stand down, a total of more than 500 people as a result of production stoppages.

The CCIWA survey found that half of the surveyed businesses had been directly or indirectly affected by the gas shortages.

But the peak business group said it was too early to tell what damage would be inflicted on the economy.

"The full economic impact will depend on how long it continues and to what extent it hits key industry sectors," a CCIWA spokesman said.

Also emerging is the growing issue of where gas will be allocated as other energy supplies come on stream.

One area of interest is within the South West Interconnected System, where 40-50 per cent of the Varanus gas is consumed, or between 120 and 150 terajoules a day. About 5 per cent of existing electricity customers - those with interruptible contracts representing approximately 100 megawatts of load - have had their power cut.

With up to half the lost capacity likely to be replaced by revived coal-fired generation within two weeks, a fight is expected over how the freed up energy will be allocated.

The body coordinating the state's response, Gas Supply Coordination Committee, chaired by Jason Banks from the Office of Energy, has already stated that the order of priority of supply is: energy infrastructure; then essential services; essential supply to residential customers; industries providing essential goods and services to the WA community; and then all other industries recognising their importance to the state and national economy.

With much of the top part of that pecking order being adequately supplied, the questions will arise about how this additional energy will be prioritised.

CCIWA's view is that there is no reason why the market should not reign.

"What we have said is there is no reason for government intervention at this stage," a spokesman said. "The market is still the best place for the sale and allocation of any energy."

The CCIWA survey shows WA business appears worse off than their Victorian counterparts during the three-week gas shutdown as a result of the Longford gas explosion in 1998, which caused two fatalities.

Just more than one third of business was affected in Victoria, with a big skew to smaller businesses in hospitality, entertainment and manufacturing.

According to a study after the event by the Victorian Employers' Chamber of Commerce & Industry, typically half of the respondents' staff were laid off or stood down as a result of the crisis - 18 employees per business from an average staffing level of 34.4.

Of those, 10 full-time staff per business on average were stood down.

While the average impact of lost sales was $14,800, the mean figure was $81,400, a number that the VECCI said implied that the 1998 crisis had a significant impact on a small number of small to medium enterprises.

Victorian export earnings fell by $200 million during the event, though business investment was not significantly affected.

Business cash flow across Victoria was estimated to have reduced by $4.3 billion as a result of the Longford crisis.

VECCI chief economist Steven Wojtkiw said Victoria was less dependent on gas than WA and the emergence of a national energy market had helped lower the threat of a repeat of Longford.

About one fifth of respondents to the VECCI survey reported that the gas crisis was likely to have a negative impact on the future purchasing decisions of their customers.

As an assistance measure, Victorian businesses most favoured a one-off allowance or tax deduction for investment in alternative energy, a business tax moratorium, deferment of loan repayments and accelerated unemployment benefits.

In response to demands from WA business for more information, the government has sought to provide a daily update on its crisis committee's strategy and what supplies have been available.

State-owned Verve Energy will recommission three units at its Muja coal-fired power stations. The first 60 megawatt unit will be operational in six weeks.

It will also bring 100MW at its Muja 7 station back on line by mid July and be at full capacity of 227MW by early August following a maintenance shut-down.

The North West Shelf is currently supplying an average of 50 terajoules per day of additional capacity - representing about 13 per cent of the production lost through Varanus.


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