Kagome Australia chief executive Jason Fritsch said if the food processing company was to negotiate an annual gas supply contract right now, it would be $11 million.
This is a massive jump from their current annual gas bill of $3.4 million.
“That’s getting into ‘don’t run the business’ stuff,” Mr Fritsch said.
“You can’t operate at that level. It’ll force us to shut the doors.”
Luckily for Kagome Australia, the Echuca-based company locked in its 2023 gas contract in January when prices were just starting to creep upwards.
“We are currently on $8/GJ and in January we locked in our 2023 prices for $10/GJ,” Mr Fritsch said.
This took the company from an anticipated gas bill of $3.4 million (2022) to $4.4 million (2023).
“That is still a million dollars more, so we weren’t happy about it,” Mr Fritsch said.
Kagome uses 400,000 gigajoules of gas a year — the majority consumed across February, March and April to process tomatoes.
Across June and July the factory will process 30,000 tonnes of carrots before moving onto apples in May.
“Pretty much all the gas is used for heating and to create steam for the evaporation process,” Mr Fritsch said.
The current gas price spike has been super-charged by the sharp arrival of winter alongside the compounding problems of coal-fired power plants being shut down, the recent collapse of gas supplier Ai Group and the Russian invasion of Ukraine which has disrupted fossil fuel supply in Europe.
Mr Fritsch said while Kagome Australia had managed to avoid extreme prices due to its gas contracts, there was a real worry for the manufacturing industry as a whole.
“I’m really concerned for the many, many processors in the east who don’t have their 2023 covered — or even the second half of the year covered,” he said.
Mr Fritsch said countries with domestic gas reservation policies were experiencing the same price spike.
“In those countries domestic gas is made available to local industry first and whatever is left is exported ... in Australia we almost do it the other way around.
“What we need is strong leadership to increase supply and decrease price.”
Australia does have a Australian Domestic Gas Security Mechanism which can be triggered during a gas shortfall, but Federal Resources Minister Madeleine King is required to declare when a ‘gas shortfall’ is in effect.
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