Manufacturers deal direct with producers to secure gas supplies

Analysis by Peter Roberts

A major trend is developing with big manufacturers by-passing distributors and retailers and dealing direct with gas producers to secure reasonably-priced, long-term access to the key industrial fuel.

Queensland gas producer Senex Energy (ASX: SXY) signed an initial deal this week with packaging manufacturer, Orora (ASX: ORA).

The two year agreement allows for a six-year extension, and will see Senex supply Orora with up to 2.2 petajoules (PJ) of gas annually from the company’s Project Atlas coal seam gas operation.

Last month @AuManufacturing reported that Senex would supply gas to CSR factories making PGH bricks, Gyprock plasterboard and Bradford insulation.

Senex’s gas marketing focus is to partner with domestic commercial and industrial customers.

Senex’s focus follows on from that of Central Petroleum (ASX:CTP) which began shipping gas in January from Alice Springs to fertiliser manufacturer Incitec Pivot (ASX:IPL) in eastern Australia.

Manufactrurers have been suffering rising prices for gas, uncertainty in supply and a lack of long-term contracts for several years.

Clearly there is vast potential for companies to by-pass distributors and retailers – who in many cases add no value to the deal – and deal direct with producers.

Such private deals can work both for producers looking to underpin new developments, and manufacturers looking for secure supply.

Perhaps there is also potential for some entrepreneurial soul to act on behalf of groups of small businesses – the ACCC is open to collective bargaining by SMEs and has the power to declare them lawful.

The market price of natural gas is around $8.00/GJ, according to the Australian Energy Market Operator (AEMO).

Picture: Senex Energy/Project Atlas

Subscribe to our free @AuManufacturing newsletter here.