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Hot air fuels gas threat

By Matthew Warren - posted Tuesday, 29 October 2013

Gas policy debate in Australia is quickly descending into farce. A conga line of opinions based on hand-picked factoids are filling the debate with clueless self-interest. If you say something often enough, however inane, it might be taken seriously.

We have calls for reservation of gas supplies that don't yet exist and an orchestrated "grassroots" campaign against development of gas reserves in NSW.

Australia's beleaguered manufacturing sector is seeking impossible intervention in energy markets to save their businesses, when what they are seeking is some kind of intervention via an uncomfortable debate about industry policy.


More recently we have seen new voodoo economics feigning outrage that increased gas development isn't bringing prices down. Or better still, that the concerns about a gas shortage in NSW is simply a conspiracy between state and federal governments, gas suppliers and gas customers in order to jack up prices.

Confused? Get in the queue.

Australia has lots of gas. Gas fields in the Cooper and Gippsland basins have supplied much of the east coast since the 1960s.

The current crunch has been triggered by the depletion of these original gas sources, with the remaining gas often harder and more expensive to extract. This is a big problem solved by a big solution: the discovery and development of gas in deep coal seams located along the east coast of Australia.

As a result east coast gas reserves currently total around 45,000 PJ – 84 per cent of this from coal seams. To give some perspective east coast domestic consumption is around 700 PJ per annum. And there is more resource potential still, with large shale gas resources across Australia.

But there's a catch. Because of their more complicated geography, these new "unconventional" gas reserves and resources are more expensive to extract. The current east coast domestic price of around $3-$4/GJ simply isn't high enough to unlock much investment.


The key is exports. Australia's gas exports are estimated to reach $60 billion in 2017-18. The liquefaction of natural gas exports out of Gladstone is fetching prices of around $8-$9/GJ on the back of strong and growing gas demand in Asia.

Supplying this growth market is a major windfall gain for the Australian economy. Added to the massive gas projects in the West, Australia could be the world's biggest gas exporter by 2017.

In Queensland there is no gas shortage. Customers will pay the new higher price of the new more expensive gas, but the deals will get done. Victoria has sufficient supplies of gas from Bass Strait, which will also meet demand in neighbouring states.

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About the Author

Matthew Warren is CEO of the Energy Supply Association of Australia.

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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