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High gas prices threaten Australian manufacturers

Melbourne

AUSTRALIA'S gas prices are so high they could force the imminent shutdown of some manufacturing on the east coast, the nation's competition watchdog said on Tuesday, urging gas producers to step up output and offer reasonable prices.

The warning comes three years after the Australian Competition and Consumer Commission first flagged prices were rising amid uncertainty over domestic gas supply, due to the start-up of liquefied natural gas (LNG) exports from the eastern state of Queensland, cuts in exploration spending and drilling bans.

Australian Competition and Consumer Commission Chairman Rod Sims told a gas conference in Sydney that "the high cost of gas, and the high cost of electricity, is making it extremely hard for these businesses and poses an imminent threat"

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Businesses and manufacturers dependent on gas for their operations have told the watchdog they are increasingly likely to move from the east coast or shut operations, he said.

The Australian government succeeded two years ago in pressuring the three east coast LNG exporters - led by ConocoPhillips and Origin Energy, Royal Dutch Shell and Santos Ltd - to boost local gas supply.

But Mr Sims said producers now need to "provide immediate price relief to the manufacturing sector".

States also need to do more to encourage new gas development by lifting blanket drilling bans.

The high gas prices and prospects of a supply shortage have attracted five proposals to import LNG into south-eastern Australia, even as Australia is poised to become the world's top LNG exporter. REUTERS