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Incitec says gas price puts 1500 jobs at stake

Chemical and fertiliser producer Incitec Pivot says the future of its Gibson Island plant – and the 1500 jobs it provides – could hinge on it securing a reasonable price for the gas deal it put to the market last month.

Incitec Pivot is looking to secure a 10 year, 15 petajoule per annum supply contract, with a start date of October 1, 2018.

But with the gas market in a major upheaval phase, the company is reportedly concerned it may not be able to secure a good, 10-year price between now and October 1 next year.

300 are employed at the 48-year-old fertiliser plant in Brisbane, and the company says roughly 1,200 indirect jobs exist thanks to the plant’s operation. There’s also the potential fallout for the plant’s major customers – Queensland farmers – if a shutdown were to occur.

“The mission to save Gibson Island continues and Incitec Pivot is investigating all options to secure economic gas,” a company spokesperson was quoted as saying by The Australian.

“Incitec Pivot believes that economic gas pricing needs to reflect the Australian Competition & Consumer Commission Queensland benchmark price, as reported in the ACCC interim report.”

Last month’s biannual ACCC report into the east coast gas market – the first over a planned 3-year span – set a benchmark of $5.87 per gigajoule for Queensland gas.

But analysts reportedly believe this price – if set in a major, ten year deal – would not be enough to justify exploration for new gas reserves.

“We saw the ACCC’s comments on ‘benchmark pricing’ at the subeconomic price of $5.90 as both providing false hope to commercial and industry users and deterring what is clearly needed to help domestic users, further investment in gas development,” analysis from Macquarie said when the ACCC report was released.

Contracts in Queensland are reportedly more often being signed around the $7 to $8 per gigajoule mark, according to reports – suggesting Incitec may have a long way to go before it can reach a deal securing it sub-$6 a gigajoule gas.

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