FactCheck: does Australia have a gas supply crisis?
Friday, 6 September 2013
By Bill Collins.
The Greens' leader Christine Milne says there isn't any evidence that we have a gas supply crisis in Australia. Her argument goes that without a supply crisis there's no need to look into "unconventional" gas extraction options, such as coal seam gas (CSG) or shale gas.
"I've yet to see any evidence that we have a [gas] supply crisis in Australia at all." – Australian Greens' leader Christine Milne, Fairfax Google+ hangout, 26 August.
But it isn't quite true to say there is no gas supply crisis in Australia. While most of our states have secured their gas energy supplies for the next decade, there is one with a looming supply problem – New South Wales.
Australia's "proven and probable" reserves are estimated to be around 140,000 petajoules – more than two-thirds of which is from "conventional" gas reservoirs, with the remainder from "unconventional" coal seam gas reserves on the east coast.
That total is enough to meet more than 70 years of gas demand at current rates of production.
With booming global demand for gas, Australia is ramping up its liquid natural gas (LNG) exports – meaning much of our gas is destined to be shipped overseas. But what is good news for exporters is not necessarily good for all local consumers of gas, especially in NSW.
As the above map illustrates, NSW does not have any significant resources of "conventional" natural gas – that is, gas that can be extracted using traditional methods. Instead, its largest resources are of "unconventional" coal seam gas. (See explainer below on different types of gas.)
So far, the NSW Government has been cautiously looking into the "unconventional" coal seam gas industry. Under intense pressure from environmental and community interest groups, NSW has the most stringent state regulatory controls in one of the most regulated countries in the world.
That has left NSW facing a contracted supply problem over the next few years, or possibly decades.
By 2017, gas from Queensland and Western Australian could create the world's biggest gas export industry, worth a projected $53 billion a year to Australia.
In the meantime, long-term gas supply contracts in NSW will expire within three years, reducing to about 10% of current demand. In NSW, industry leaders, including Santos, Origin, AGL and the leading industry body, the Australian Petroleum Production and Exploration Association, have all used submissions to the recently released government's inquiry into coal seam gas to point out the looming crisis.
In this scenario of increasing demand in eastern Australia, unless NSW quickly secures future supplies, homes and businesses will suffer significant energy price increases.
Future supplies can be secured either through new but expensive contracts, or through ensuring local supply through development of its own state reserves. The second alternative is also relatively expensive in the short-term, but the long-term prospects of stabilising energy prices are much better. However, the current regulatory process in NSW is likely to extend the length of time for project approval from three to five years, meaning that no gas from new projects will be available in NSW until about 2020.
Ultimately, if gas is seen as the "cleaner alternative" transition energy to coal, the need for gas security in Australia will be a necessity for least half a century. In this scenario, the NSW crisis cannot be solved by securing gas energy from interstate through intermittent, increasingly expensive contracts.
Christine Milne is partly right, in that Australia as a whole does not have a gas supply crisis, because we have abundant reserves. Yet it isn't entirely true to say there is no gas supply crisis in Australia: our most populous state, NSW, does have a looming crisis as it has not secured its gas energy supply at a time of high global demand. The problem will be ongoing, potentially extending over decades, unless NSW overcomes the present coal seam gas impasse.
I broadly agree with this article, which raises a valid point regarding Australia's natural gas prospects, rightly warning about the looming gas crisis in NSW. Moreover, it raises an important issue for Australia – that of domestic energy security – which is often overlooked in the political debate. This is unsurprising given that there is bipartisan support for an "exports first" policy. – Vlado Vivoda
Professor Bill Collins is Director of the NSW Institute for Frontiers Geoscience at the University of Newcastle. It is not funded by the CSG industry, nor has any research funding with companies affiliated with the industry. Prof Collins does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article. Professor Collins receives funding from the Australian Research Council
Vlado Vivoda receives funding from the ARC.