Hard to believe, isn’t it? But it’s true: in the last decade, tens of thousands of square kilometers of Queensland farmland has been covered in gas fields. The export gas rush in Australia is one of the largest and fastest expansions of a gas industry ever seen, anywhere in the world. We are awash with gas. The problem is we are allowing almost all of the cheap and easy-to-get-at gas to be sent overseas.
The gas in some areas is close to the surface, in big reserves all together, where there are no bothersome farmers, aquifers or national parks in the way. That gas is relatively cheap to extract.
But some gas is deeper and harder to get at for all sorts of geological reasons. And that gas is more expensive to extract. Some gas is not just deep and hard to get at, but is underneath valuable aquifers that would need to be drilled through to get the gas. Much of it is on properties of people who don’t want a gas field on their land, or on properties a long way from where the gas is needed. That gas is very expensive to extract.
So, naturally, the gas companies’ first preference is for the easily extractable, cheap gas, and they drill that and sell it first.
The problem is, there is a limited amount of that cheaper to extract gas. Once that gas is gone, only the difficult, expensive-to-extract gas remains.
That was OK when it was just being sold to Australian customers. There was enough reasonably easily extractable, cheap gas to last for decades at least.
The problem began around 2009-10 when the Queensland government allowed a small group of huge mostly global oil and gas companies to build three massive export terminals that essentially enabled them to export as much gas as they liked, as quickly as they liked.
[Gas crisis: warning! warning! warning! Um, what comes next?]
This opened the floodgates and suddenly vast quantities were being sent to Asia, using up the affordable gas very quickly.
Not only did they export coal-seam gas, but because the entire east coast gas market is connected they also started exporting cheap Victorian Bass Strait gas.
In December 2014, the Australian Pipeline Association (APA) reversed the direction of the Moomba to Sydney pipeline so the gas cheap gas from Victoria and South Australia could flow to feed the insatiable Queensland export terminals rather than supply Australian companies.
Not only that, but Australian gas-fired power stations started selling their gas for export rather than generating power, when it suited them. This meant South Australia’s newest gas generator, Pelican Point, was not operating at full capacity during peak times.
Despite being the obvious cause of the problem, the gas industry cries that the solution is to cover even more of Australia in gas fields, starting with Narrabri in New South Wales.
But Narrabri is expensive gas. The Australian Energy Market operator (AEMO) estimates Narrabri gas would cost up to $7.25 per gigajoule (GJs) to extract.
University of Melbourne experts estimate that there are 58,000 petajoules (PJs) of gas in Australia cheaper to extract than Narrabri. That’s enough to last Australian customers for around 100 years at current rates of use.
So there is plenty of affordable gas without opening new fields, the problem is that it’s all been reserved for export by the global gas majors.
Northern Territory and Victorian gas is even more expensive again. Mining research company Wood Mackenzie has estimated that NT gas would cost $12-13-plus per gigajoule to get to market, and there are no proven Victorian reserves, but AEMO estimates “prospective” reserves at $10-plus per gigajoule just to extract.
That means developing gas at Narrabri or the even more expensive and almost entirely unproven gas in Victoria and the Northern Territory is irrelevant to either ensuring supply or bringing down the gas price.
[Another day, another Turnbull gas press conference]
Even if we were foolish enough to develop these reserves, there is absolutely nothing to stop these companies exporting this gas anyway.
When you have a leaking bucket, you don’t run off to get more water; you patch the leak. We still have 100 years of gas that is cheaper than potential NSW, NT, or Victorian gas fields. But the gax exporters are sitting on it.
Every day we allow the gas floodgates to remain open we are losing vast quantities of affordable gas, double the amount used by Australian consumers.
The government’s policy to require these companies to make the gas available to domestic suppliers is entirely justified.
For the longer term businesses and households would be well advised to look at ways of switching from gas. It’s already happening. Households are switching from gas to efficient electrical devises, renewable energy is already cheaper than gas, and even many industries, including Whyalla steelworks, have decided to shift to renewables.
Forcing states to mine gas that is overwhelmingly opposed by their populations is entirely unjustified and will do nothing to solve the problem.
*Mark Ogge is the public principal adviser at The Australia Institute.
How is it, that with all of this exporting of gas, that Queensland is only making royalty income of $194M/y (quoting a figure from Bernard’s article “Are Victoria and NSW etc.”)? That doesn’t seem like much to me. You won’t wind up with a Norwegian or Quatari-style sovereign wealth fund that way.
Royalties in Qld are 10% of well-head value, minus depreciation etc. Well-head value probably (?) still that set by Howard in 2002 in his gas deal with China, which locked in low prices for 25 years.
‘Honest John’, what a cost to Australia this man has been, and continues to be. Apparently this week is expected to be huge for property sales. Investors get the benefits of Capital Gain Tax concessions that ‘Honest John’ has left us with. Could be Golden Week for the Pollies to add to their portfolios too, and they ain’t going to change the concessions.
An unconscionable act of treachery by J W Howard is the reason. Japan gets more in tax from Qld gas than Qld does.
Dumb political decisions and if One was cynical, we would say likely corrupt. Australia could be setting aside revenue to fund future clean energy projects, instead we are helping the big multinationals to become richer, faster.
Government ‘rules’ . . . we the people deliver – OR ELSE!
It may well be considered expensive by current standards, but in the long-term it may become more expensive still.
$10 per gigajoule is 3.6 cents per kilowatt hour in raw heat. If converted to baseload electricity, it would be 10 cents per kilowatt hour. That is the current ballpark for nuclear-supplied baseload electricity. Unlike gas, that would be carbon free baseload. (Wind cannot do baseload at all.)
And that is before we get around to applying a carbon tax.
Can’t renewables power pumped hydro to support baseload?
Will, someone has persuaded you that pumped hydro can provide baseload for the entire country. Where are the newly discovered mountains? Where are the unused rivers? Where are the dispensable ecologies that we can casually flood? Who are the manufacturers of the mud turbines that endlessly churn so much energy that there will still be some available in the disaster that no one had ever planned for?
The article above uses arithmetic, figures can be challenged and checked, figures that are respected by accountants and engineers when they are right and can be corrected when they are wrong. However whoever promised you that pumped hydro can do it, did not show you the arithmetic to prove that it can.
You’ve been had.
It was just some whacko oufit called the ANU –
http://www.smh.com.au/business/energy/australia-blessed-with-more-than-22000-possible-pump-storage-sites-anu-finds-20170920-gyl78b.html
Will, having an address at the ANU only indicates a group in search of research funds. It does not mean that they have a project that could replace all of Australia’s emissions . You could push them to reveal their arithmetic, but all it would ever indicate is a token reduction in emissions. While there are good minded people silly enough to believe that token reductions are enough, such concepts will continue to get funding.
The ANU numbers do stack up.
Pumped hydro doesn’t need wild rivers. Just needs a reasonable drop from top of the system to bottom of the system – the water just keeps being recycled!
There are thousands of suitable locations. Just needs some leadership to put it in place.
Good for you, Steve, in agreeing that numbers matter. Numbers can be checked, corrected and updated. However we are not seeing enough numbers to describe a system that could completely backup 100% renewable electric supply for Australia. Without that description, my challenge stands – that the concept can only ever provide an excuse for inaction.
So far you said it can be done without damming wild rivers. Okay, where are these other high and low volumes if they are not valleys in hilly country? And if water only needs to be recycled from place to place, it will still evaporate continuously throughout the dry season, and need equally continuous freshwater supplies. So those valleys must have year-round running rivers in them. Wild rivers, to be drowned in a pretense of rescuing the environment.
Dodger has kept his nukes Tourette’s in check lately but it always breaks out.
A good article – explains the situation clearly.
That analogy of the leaking bucket should be used in advertising; it’s easy to understand, and that’s what convinces people.
Those LNG plants in Qld are going to cost us our future, and Labor was well part of those decisions and has to take responsibility. CSG is a dead end, the worst of all possible gas extraction methodologies.
On the bright side though, this will mean that we will have to wean ourselves off gas as it will soon be too expensive, as Roger points out, almost as expensive as nuclear, and that is the worst route of all.
So ultimately this might help us make the case for a nation powered by renewables, including pumped hydro, which has been studied by ANU and requires only about 12 out of the 22,000 identifies sites to be actually implemented.
How are those numbers holding up? Well, better than any alternative.