The report was commissioned by the Australian Petroleum Production and Exploration Association to highlight the likely economic and energy security consequences for NSW.
APPEA – in conjunction with the Australian Workers Union and the Australian Industry Group – has written to NSW Premier Barry O’Farrell highlighting the likely consequences for industry, manufacturing and households of failing to adequately encourage the development of the state’s natural gas reserves and resources.
ACIL’s modelling compares two contrasting scenarios.
The “base scenario” entails the natural expansion of the state’s gas industry while under the “CSG freeze scenario” the state continues to source 95% of its gas from other states.
The study finds a CSG freeze scenario would result in:
- wholesale gas prices in Sydney being 24% higher, on average, relative to the base scenario over the period 2025-2035
- a reduction of about $4 billion in real 2012-13 dollars in direct capital investment in NSW upstream CSG development and a loss of about $2.9 billion of associated recurrent operating expenditure foregone over the period to 2035. These losses would result in investment moving to other jurisdictions and the net result would be a cut in real NSW gross state product of $14.2 billion over the period to 2034-35
- NSW real income being $24.6 billion lower over the period to 2035. That is $7.9 billion lower in net present value terms, which equates to $1100 per NSW resident
- NSW employment falling by 34,287 employee years compared to the base scenario. That is equivalent to the loss of 1441 full-time equivalent jobs each year
- loss of royalty and tax revenues. CSG royalties and payroll tax over the period 2035 reduced by about $1.9 billion aggregate
- a loss in average NSW household real income of $290 per household per year and an increase in average NSW household electricity bills of $31 per household per year and an increase in gas bills of about $22 per household.
APPEA chief executive David Byers said NSW’s failure to respond to increasing gas demand and develop its gas reserves would have unfortunate consequences in the form of lost jobs, higher prices and foregone economic opportunity.
“Appeasement of vocal and extreme minorities has meant NSW now faces unnecessary economic and energy security risks,” he said.
“Reactive policies such as the blanket exclusion of vast tracts of the state from gas development should be urgently reconsidered.”
