Demand for gas industry expansion has slowed: report

A DROP in manufacturing levels in Australia and the proposed abolition of the carbon tax means the demand for the expansion of the gas industry is not as strong as it was a few years ago, a report shows.

The report by Morgan Stanley on shale gas opportunities says that while there will be a gap in gas supply in New South Wales, in particular, from 2016, there are various moves already under way to fill this gap for the domestic market - with one strong possibility being more shale gas from the Cooper Basin area on the border of South Australia, NSW and Queensland.

The report says the outlook for the expansion of the gas industry was very strong three years ago, but since then "domestic gas markets are going short and prices have risen, but the market opportunity is shrinking and it will be contested".

"Demand is softening for two reasons. The first is lower requirement for gas-fired power generation amid over-capacity in the power industry and impending abolition of the carbon tax.

"The second reason is lower demand from the industrial sector due to erosion of export manufacturing and, in particular, industries exposed to high gas prices," the report says.

Read the full story at The Australian.