Queensland gas producers band together to meet southern demand

October 4th, 2017

 

East Coast manufacturers and small business employers can breathe a little more easily today, thanks to natural gas producers in the north.

Queensland gas producers have banded together to strike an agreement which will ensure supply to customers in NSW and Victoria into 2019.

The remarkable agreement also represents what the Australian Petroleum Production  and Exploration Association described as a “reprieve” for the Victorian and NSW governments, which have allowed blockers to development of their own natural gas resources.

Our two most populous States stand out as being the biggest consumers of gas, the most in need of increased supply and the least willing to pull their own weight in development.

In past decades they have been complacent, drawing on cheap and reliable supply from Bass Strait and South Australia’s Cooper Basin.  This supply used to be plentiful and relatively easy to extract– and that is why it was cheap.

Over the last several years, that situation has changed, quite dramatically – and that should not be a surprise to anyone, as the industry has warned of a looming supply crunch for a number of years.

While the ‘redirection’ of gas planned for export back into domestic markets to the south is a short-term benefit for customers, it is not a solution to the problem.  The only true solution is increased supply.

This poignant fact was acknowledged by the Australian Financial Review today, as it has been in the past, by leaders from Labor and Liberal parties.

In applauding the agreement by gas producers, today’s AFR nonetheless noted the ‘band-aid’ nature of the redirection of (planned) export gas to domestic markets  – and the newspaper did not miss the political targets.

Australia’s energy crisis will not be fixed  unless State governments stop shooting themselves in the foot,” it said.

The maddest and most profoundly embarrassing aspect of Australia’s energy crisis is that it is entirely of our own making,” the AFR went on.

“It is the result of the willingness by environmentalists and state governments – and some farmer groups – to accept the science of climate change but not the science of extracting gas from underground, including through the process of fracking.”    

Australia was missing out, while the USA was enjoying a gas-lead manufacturing boom and the nation’s first ever reduction in carbon emissions.

 While the US has revived its economy and much of its manufacturing through a cheap gas revolution, multiple Australian state and territories have created an artificial gas shortage by imposing bans on its extraction.

“That’s depriving the central and east coast energy market of a fuel to bridge the transition to clean energy and driven domestic gas prices through the roof. That in turn has forced the federal Coalition government to threaten to force Queensland’s new $80 billion liquefied natural gas industry to surrender supplies that would not have been developed in the first place if not for the export market.

  And then the kicker:

“The resulting increase in sovereign risk only jeopardises further investment in new gas supplies.”

Australia has abundant supplies of natural gas – the essential ingredient of much manufacturing and the ideal accompaniment to the deployment of renewable energy.

However, the State governments which are stifling resource development for the sake of green votes in specific marginal seats need to show greater purpose and resilience.

They need to follow the advice of their own scientists — the Commonwealth Chief Scientist, the NSW Chief Scientist and the Victorian Environment Department – and allow sensibly and properly regulated development of natural gas.

As APPEA CEO Dr Malcolm Roberts said today:

“Gas customers in the southern states are already paying a 25 per cent premium due to the bans and restrictions imposed by their governments.

“Victoria is facing a (major) forecast shortfall of 116 petajoules in 2018, just as production from local offshore fields begins to decline. Yet onshore gas remains off-limits.

“ It is policy madness.”

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