australia: August 14, 2008

The Western Australian Chamber of Commerce recently announced that the explosion at the Varanus Island gas processing facility in June has cost the national economy an estimated $2.4 billion as a result of disrupted productivity and increased gas costs due to lack of supply. Apache Energy, the processing facility’s owner, estimates that 60 percent or about 200 terajoules of supply will be restored by late August. However, full capacity will not be available until December of this year.

In response to the interruption in gas supply, the Western Australian Government has announced plans for strategic gas reserves to be set aside for emergency services in case there is a similar incident in the future. Many countries throughout the world, such as Japan, the United States and the United Kingdom, have set aside strategic petroleum and gas reserves for such emergencies.

Compounding the effects of the explosion there has been a surge in gas pricing in the eastern states of the country due to an increase in residential and industrial use. The gas shortage in New South Wales has been exacerbated by price hikes and also by the rising use of gas for electricity generation due to the lower carbon emissions produced. Since less water is required for electricity generation using gas this has also become a much desired method given Australia’s drought conditions.

Escalating gas and electricity pricing paints a very gloomy picture for the country’s consumers. With the added costs of new generation capacity, greenhouse emissions regulations and the continuing drought in some parts of Australia, consumers face hefty increases in running both their businesses and homes. There have also been increases in mortgage interest rates and petrol/diesel prices which continue to burden everyone’s wallet.