Food and beverage sector struggles as WA gas crisis threatens to be worse than Longford

Posted by Daniel Palmer on 26th June 2008

Varanus Island

Concerns are growing rapidly within Western Australia’s $5.5 billion food and beverage manufacturing sector that the current gas supply crisis will cause both immediate and permanent damage to the industry, resulting in a loss of jobs, threats to the State’s food supply, and potential jeopardy to important interstate and export markets.

The Food Industry Association of WA , which represents the State’s food and beverage manufacturers and associated suppliers, says that major industry players are growing increasingly fearful that the gas supply crisis is starting to cripple operations permanently and seriously.

FIA chief executive officer, Andrea Berteit, has now met with the Premier’s advisor and briefed him on the increasingly dire circumstances being confronted by her members. “We’re now ringing alarm bells because the problem is getting more serious by the day. Even though our members are trying to do the right thing, the current situation cannot be sustained,” she warned. “Where possible, they’ve switched to other, more expensive fuels, rescheduled operations to non-peak energy periods, reduced production through maintenance shutdowns, and asked staff to take annual leave. Several have already closed their doors, the latest being Vesco Foods which has halted operations for at a week.”

The crisis began after an explosion at the Varanus Island gas processing plant on June 3, which cut off about a third of the state’s gas supplies.

“A major industry concern is Alinta’s rotational gas supply strategy to cope with the gas loss, which gives 12 hours notice of supply reductions or withdrawals. This strategy is unworkable in respect of raw and semi-processed foodstuff and beverage manufacturing,” Ms Berteit reported. “At a minimum we certainly need this notice period extended and expanded to a week’s forecasts, while other available gas supplies need to be reallocated into priority areas such as food production.”

Ms Berteit said that, while there was already a shortage of milk in WA, the current 12-hour notice period cold see a million litres of milk a day poured down the drain. “The inability to process food and the daily uncertainty about gas supplies was also impacting on people who feared for their jobs whilst essential products were becoming unavailable for the foodservice sector,” she advised.

Ms Berteit added that the customers of Alinta Gas were the most affected by the crisis. At the time of the incident Alinta Gas supplied all residential customers in the Perth Metro area and about 10,000 small to medium size business customers. The majority of the current shortfall is carried by the 10,000 commercial customers of Alinta that have seen their allocation cut.

The FIA have requested the government to consider an urgent reallocation of gas between the suppliers to ensure critical areas such as food and beverage production had a minimum and more predictability energy supply.

Varanus Island Gas Plant

The gas shortage in Victoria is still fresh in the minds of many, with West Australian Opposition energy spokesman John Day, claiming the crisis is as serious as the 1998 Longford gas explosion. The Longford explosion impacted on about one third of state’s businesses and had a major impact, particularly on smaller businesses. Industry estimates are that businesses lost about $4.3 billion in revenues, around 50 per cent of staff were laid off and export earnings fell by about $200 million, indicating the extent of the potential impact on Western Australia.

Ms Berteit said her members were concerned that in light of this experience, and their high dependence on gas, the crisis could have irrecoverable long term impacts on the WA food and beverage industry in the future.

She also advised that products were being brought in from the Eastern States and overseas to makeup the State’s shortfall caused by food and beverage manufacturing being substantially reduced over the last three weeks. “We have addressed these issues and our concerns with the various State governments departments and have offered to collaborate proactively on short term solutions as well as strategies that will avoid the industry’s future vulnerability.”

Regular updates can be found on the FIA website.