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3 Critical Steps to Tackle the Gas Price Crunch

 

Australia’s increasingly challenging energy situation is starting to bite hard, with the worst-case predictions of various commentators now becoming reality. As existing gas contracts expire, the best prices available for future contracts are often double, and in some cases triple current prices, with notable uncertainty surrounding volume and longevity of contracts.

This is happening on top of the existing turbulence in the electricity supply market across Australia caused by a range of political, environmental and asset management factors. 

These problems have hit the headlines, and significant industry lobbying is underway in an attempt to avoid severe impacts such as plant closures in a number of sectors.

Keeping a Level Head

It’s important not to over-analyse political statements and market forecasts of gas prices and supply dynamics. Rather, it’s time to accept that for the foreseeable future, the days of relatively cheap and stable gas supply are over, and take action to mitigate the effects on your business.

All gas users must expect significant price increases and volatility in terms of pricing, supply and contracts, and strap in for a bumpy ride by understanding their gas demand in as much detail as possible. 

This informed approach can prove extremely valuable when negotiating your next gas contract, and facilitates smart business decisions affecting gas consumption, such as product mixes, production timing, and capital investment priorities.

Getting on the Front Foot

Obtaining a clear picture of a site’s gas consumption lies somewhere between a challenge and a mystery.  Minimal sub-metering, woefully slow billing, and bills that confuse even the most seasoned gas expert are all common headaches that can make it seemingly impossible to get a handle on your site’s consumption. When you’re relying on this data to formulate a fast and effective response in a complex gas game, the clarity and timeliness of the data is critical. 

Quick Wins Available

Rather than simply waiting to see if the federal government intervenes in the gas market, it makes good business sense to capitalise on the significant gains that can be made immediately, irrespective of what might happen with gas supply and pricing.

The majority of Australian manufacturers have taken a more low-key approach to their gas consumption management up until now, so many sites have low-hanging fruit ripe for achieving quick gas efficiency wins.

In one of the few silver linings to emerge from the gas price hikes, returns on investment for gas efficiency upgrades are now better than ever. Projects that were previously calculated with a five-year payback and deemed unviable now have paybacks of less than 2½ years, courtesy of spiralling gas prices. Additionally, there have been technology developments that are providing new opportunities, particularly around combustion control, and metering and monitoring. 

3 Steps to Minimise the Gas Price Blow

Having recently helped multiple large manufacturers across New South Wales and Victoria, we know every client and sector is facing a unique set of circumstances. However three key steps have emerged as the critical actions every large gas user should take to best navigate these tumultuous times.

1. Commercial and technical gas health checks

This involves a desktop analysis of your site’s consumption and production data in order to model scenarios that will help with budgeting and contract negotiations. Here’s what you will need:

  • Key terms from your current gas contract or new contracts being planned:

- Variable and fixed energy tariffs

- Minimum ACQ “Take-or-pay”

- Maximum daily quantity (MDQ)

- Maximum hourly quantity (MHQ)

- Annual contract quantity (ACQ)

  • Historical site gas consumption data at daily resolution or finer, and matching data for production
  • Site walk-through with an experienced and independent gas and steam engineer, to document gas and steam system components, operating status and identify initial opportunities for improvement


2. Educate and engage key stakeholders across the business

The gas price shock requires a mind-shift for all stakeholders across the business, and the best way to achieve this is by engaging all relevant teams. 

While historically it was only procurement and finance departments that were privy to the mysterious jargon and commercial complexities in typical gas contracts, it’s now critical that senior management, engineering, operations and maintenance teams all understand the basics too.

Start by explaining what the media attention is about and the potential impacts at site level before encouraging ideas with an open workshop. This often reveals opportunities that even external consultants can miss. 

Present the findings of the health check so staff can relate directly to the data and see the impacts of their actions. An introduction to gas efficiency is appropriate at this point, and can be followed up with more detailed technical training tailored to the site if needed.

3. Take prioritised action

Steps 1 and 2 should generate a simple list of opportunities to improve gas efficiency and management that includes estimates of potential gas savings, estimated costs, current status of investigations and simple payback.

Rank your list by simple payback, starting with those actions that will deliver quick savings with little or no capital cost. One of the most common quick wins is improving combustion efficiency through optimised burner tuning on boilers, ovens and furnaces, so this may be a good start point.

Can we help your business respond to the gas price shock?

Out Performers’ engineering team has over 60 years combined experience with natural gas systems for industrial and commercial sites across Australia. Our involvement has ranged from metering and monitoring, energy audits and designs through to verifying energy savings and training.

We know every client is at a different point on the price crunch journey, and that’s why we believe in tailoring support to suit individual circumstances. Our proven methodology gathers and analyses as much of a site’s gas consumption data as possible to spot important trends and key improvement opportunities specific to your operation.

Head here to explore the services we have developed to help organisations respond to the current situation. If you would like Out Performers to tailor a program specifically for your business, we'd love to hear from you.

Contact out performers' National Business Manager on 0401 229 114 or email andrew.williamson@outperformers.com.au