Report
Australia’s Gas Guzzlers
Largest industrial methane gas users face critical clean energy transition opportunity
Key findings
1
The manufacturing sector is Australia’s third-largest gas user. Market Forces analysis reveals that just 10 industrial facilities account for approximately more than half (50.9%) of manufacturing gas demand in Australia, based on Australian Energy Market Operator (AEMO) data.
2
Five Australian Stock Exchange (ASX)-listed companies—Rio Tinto, South32, Orica, Dyno Nobel and Wesfarmers—operate six of the 10 largest gas-using facilities. Gas usage in these facilities contributes significantly to the companies’ scope 1 climate emissions, reaching up to 66% for Orica.
3
Despite the scale of gas consumption in manufacturing, the sector is overshadowed by the liquefied natural gas (LNG) industry, which uses 13 times more gas, when including exports.
4
Just five companies could face a $1.3 billion cost for Australian Carbon Credit Units (ACCUs) over the next 10 years to ‘offset’ their gas use emissions. Market Forces estimates that total annual emissions from these five companies’ gas use are approximately 5.4 million tonnes of CO₂-equivalent, amounting to roughly 54 million tonnes over the next decade.
5
Australia’s five largest ASX-listed manufacturing gas users must step up their clean transition spending. An OECD working paper highlights that “annual investments for industry decarbonisation need to increase by a factor of three to five by the end of the decade compared with current levels.” Rio Tinto and South32 spent just 3% of their capital expenditure on decarbonisation, with Orica slightly higher at 5% and Dyno Nobel at 6%, accounting for a very small portion of their overall spending. Wesfarmers does not even disclose decarbonisation capital expenditure in its annual reporting, and must address this glaring omission.
6
The basic non-iron metals and chemical production sectors, dominated by alumina and ammonia, account for nearly two-thirds (~64%) of the gas used by the Australian manufacturing sector.
7
New gas supply fails to lower prices or reduce risk for domestic users, as it is overwhelmingly directed to LNG exports. Whilst Australia’s gas production has surged by more than 4410 PJ (a 369% increase) over the past 23 years, volumes available to domestic users have stayed relatively constant, rising by only 344 PJ (a 45% increase). Conversely, LNG exports have exploded, increasing more than 10 times (954%) in that same timeframe.
8
The oil and gas industry is already the biggest contributor to Australia’s industrial emissions. Oil and gas facilities account for over half of all top 20 highest emitting Safeguard Mechanism (SGM) facilities and 32% of total SGM baseline emissions. Expanding gas supply would exacerbate this issue and further tighten the Australian Carbon Credit Unit (ACCU) market, driving up costs for other facilities operating under the Safeguard Mechanism.
9
Whilst the Australian Renewable Energy Agency (ARENA) has made significant investments in research and technology for decarbonisation, the Australian government must significantly ramp up clean transition spending—including for the manufacturing sector—or risk being left behind in a low-carbon economy.
Introduction
The manufacturing sector is Australia’s third-largest consumer of planet-heating methane gas. Addressing this gas consumption must be a key priority for the clean transition efforts of both industry and government. Manufacturing gas consumption is predominantly concentrated in the alumina and ammonia industries, with a small number of facilities responsible for a substantial portion of this demand.
Replacing gas use with clean solutions at these facilities will lead to significant emissions reductions and mitigate ongoing risks. This transition also presents a considerable opportunity for Australia to emerge as a green energy superpower in a world increasingly focused on low-carbon solutions.
Recommendations
To mitigate risk and position themselves to thrive in the clean transition, Australia’s largest gas users should:
1
Significantly increase capital expenditure on developing and implementing clean alternatives.
2
Advocate directly and through industry associations for federal and state governments to substantially increase funding and enabling policies for clean solutions in the manufacturing sector, as well as renewable energy, storage and transmission infrastructure.
Join us
Subscribe for email updates: be part of the movement taking action to protect our climate.