Domestic gas shortage averted – not even nearly beneficial

The Australian Energy Market Operator (AEMO) recently produced forecasts that gas availability would not be a constraint on electricity supply over the coming years, notwithstanding the tremendous increase in Liquefied Natural Gas (LNG) exports.  AEMO projects the following picture.

The expanded LNG demand is supplied by the export oriented west coast gas facilities (which produce about half of the nation’s gas) and by the, mainly Queensland, unconventional gas resulting from fracking.  It is this Queensland gas that has been the subject of controversy as the availability of terminals to allow its export has caused the domestic gas price to rise from a traditional $3-4 per gigajoule to over $12 before settling at its present level of around $9 per gigajoule.

Particular concern was the supply of gas for electricity generation (GPG in the above chart).  Gas provides about 10 per cent of electricity (wind, solar, rooftop about the same; hydro 7 per cent).  Last year’s high prices led to government jawboning and threats to the east coast miners that they would be forced to divert some supplies from exports, unless they did so “voluntarily”.

Usage for electricity is now scheduled to be reduced without this threatening the overall supply. The relief of the gas for electricity supply situation in Australia is partly due to an increase projected supply of the subsidised wind and solar production that has utterly devastated the once highly competitive electricity industry.  This form of cavalry-to-the-rescue is just what is not needed.

The fact is the “shortage” of gas, like any shortage, is only a shortage in relation to price.  There are certainly no uncontracted supplies available at the $3-4 per gj that previously prevailed and why should there be when suppliers can get net of cost returns of $7 from overseas markets?

Unlike Australia, the US has managed to combine surging domestic demand with booming exports and retained a price at under $4 per pj (this is the Henry Hub price, the normal domestic marker, but, in fact in some areas’ prices are much lower – they have recently been down to $1 in New York).  Here is the US historical trade position.

And here is the US projected output, which bears a distinct similarity with the bulging exports that Australia is experiencing.  Yet, there are few suggesting this development will markedly increase the US domestic price.

These differing outcomes stem solely from political interference resulting in Australian bans on exploration.  These are in response to an unholy left-right alliance that has spooked politicians into prohibiting the fracking technology (all gas development in the People’s Republic of Victoria) virtually everywhere outside of Queensland.  With over two million wells sunk worldwide without mishap and numerous scientific reports seeking to allay alarmists’ fabricated fears, the fracking technology has a pristine bill of health.  But the power of green fomented hysteria has proven to be too formidable in Australia.

In the US, the same confected propaganda against fracking is also present.  Moreover, there is also evidence of Russian finance stoking a social media attempt to ban fracking (ONA found “clear evidence that the Kremlin is financing and choreographing anti-fracking propaganda in the United States.”  Russia was the world’s foremost gas producer until the US overtook it last year).  But this has had limited success.  Indeed, the success of the technology in the US is attributed by Kathleen Hartnett White to “American exceptionalism” whereby politics has a smaller footprint than in other countries.

Australian prospectivity for unconventional gas that would be available using fracking technology cannot be fully known with the bans presently in place but the US Energy Department puts Australia’s potential s similar to that of the US.

The contrasting position of Australian high domestic prices with that of the US is caused purely by self-harm inflicted political bans on exploration and production.  It is yet another example of the undermining of prospective living standards brought about primarily by nihilist green activists.

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29 Responses to Domestic gas shortage averted – not even nearly beneficial

  1. zyconoclast

    So Maocolm and Fraudenburger will claim credit?

  2. H B Bear

    Yep. Doubling the price will certainly reduce demand.

    Crisis solved. Keep up the great work Lieborals.

  3. It’s easy to understand, once you understand that the entire point of this Green activism is to reduce Australia (and the world) to a feudal, agrarian, culture ruled by a few elite.

  4. Entropy

    A mild correction:

    and by the, mainly Queensland, unconventional gas resulting from fracking.

    Most coal seam gas wells in the Surat basin are into seams that are already highly friable and fracking is not required, it happens, but not for the majority. It might be different once CSG production moves into the Bowen and Galilee basins

    Personally, as CSG wells tend to be shallower than shale gas, and thus closer to useful aquifers, I would be less enthusiastic about general fracking fie CSG without a fair bit of testing first, because at least temporarily, the fracking process reversed the pressure gradient away from the well. Once the fracking water is pumped back out of course the pressure gradient is back in and up the well, so the risk is largely temporary, but still.
    As for shale gas, an almost entirely confected risk.

  5. Tom

    Great post, Alan.

    Backward green animist zealots will do whatever it takes to put our economy and our living standards back into the 19th century — aided by the Stupid.Fucking.Liberals, who believe in nothing other than the Maoist personality cult that keeps the current clueless idiot incumbent safe from the Stupid.Fucking.Liberal party room.

  6. Genghis

    So Alan perhaps you could inform our readers just what the percentage (%) of CO2 is in the different gas fields and how burning Natural Gas is beneficial for anthropological climate change (if this is even true). Perhaps you could start with the Yolla field in the Bass Basin at 18% CO2 and work from there? This Natural Gas saving the planet from coal derived CO2 is just so much BS it beggars belief.
    Regards,

  7. Entropy

    It is this Queensland gas that has been the subject of controversy as its expansion has caused the domestic gas price to rise from a traditional $3-4 per petajoule to over $12 before settling at its present level of around $9 per petajoule.

    Actually it wasn’t the expansion in production that caused the price to rise. Normally that would reduce price.
    It was the creation of access to an export market where the price was higher. The domestic price had to rise to meet the export price, otherwise it would get no supply.

  8. Entropy

    This Natural Gas saving the planet from coal derived CO2 is just so much BS it beggars belief.

    Gas plants are more efficient at energy production if you ignore cost. This is because they can spin up and down in line with demand, while coal is base load and must operate at a certain level all the time. Coal’s advantage is it very cheap, or at least was until the government destroyed normal operation of the market.

  9. Roger

    It is yet another example of the undermining of prospective living standards brought about primarily by nihilist green activists.

    The Greens would have no influence if our political class didn’t cower before them.

  10. Agree with most of Entopy’s comments. The main supply of gas in Queensland is from coal seam gas but there are pipelines from the Cooper Basin to Brisbane and also to Mt Isa. I have personally seen gas extracted from coal seams at mines in te Illawara region. The gas has resulted in explosions and deaths in mines in NSW, Qld and the Pine River mine in NZ. The gas in shallow mines particularly open cut mines escapes to atmosphere.

  11. Alan Moran

    Entropy,
    Quite right re. the cause of domestic price increases. Have clarified and amended the wording

  12. RobK

    Thanks Alan.
    The success of fracking in the US compared to Australia is, as I understand it, in large part to the superior property rights that landholders there enjoy. In most states the landholder receives a monetary benefit from production. I doubt we would see as many “lock the gate” signs here if we enjoyed the same.
    Re fracking: Overall, any dangers from fracking can be reliably managed by regulatory authorities assessed on case by case basis.

  13. RobK

     Coal’s advantage is it very cheap,………..
    In no small part due to it’s high energy density and relatively safe unconfined storabilty, its abundance and ease of handling. No other energy source can compete on all these measures.

  14. Rockdoctor

    It might be different once CSG production moves into the Bowen and Galilee basins

    My experience the smaller Bowen Basin CSG companies we almost always targeted Fort Coopers which were full of Tuffaceous layers & absolutely rubbish grades of coal but very gassy in places. Problems we came across permeability of the seam even with fracking, a lot of places not viable. Arrow had the same problems in the higher seated Rangals & Moranbah Coal Measures round Moranbah and ditched hydraulic fracturing for in seam drilling which seems to work for them.

  15. Gas
    CH4 + 2O2 –> CO2 + 2H2O
    C2H6 + 2O2 –> 2CO2 + 3H2O
    C3H8 + 5O2 —> 3CO2 + 4H2O

    Coal (mainly)
    C+O2 –> CO2

    Really can see the gas advantage.

    Besides gas is too good as heating and transport fuel to waste on electrickery.

  16. nerblnob

    What Entropy and RockDoctor said about Queensland and CSG.

    “Fracking” when referring to an industry rather than the process, generally refers to tight shale development.

    Not my line of work, I’m just about the drilling but I did do a frac job once, in CSG in the UK. CSG drilling was newish at the time – there were a couple of good ol’ boys from Kentucky across as consultants.

    25 years later, protestors are clamouring to “save” that old coal mining valley from fracking, seemingly unaware that in their terms, it must already be beyond saving.

    The locals loved us, a bit of life coming back into the area.

  17. Tel

    In no small part due to it’s high energy density and relatively safe unconfined storabilty, its abundance and ease of handling. No other energy source can compete on all these measures.

    Nuclear fuel has so much higher energy density that you don’t need to handle it often and that gives you buckets of spare money to spend on safety measures (which, admittedly you will need a lot more of as compared to coal).

  18. nerblnob

    Even so, the cost of safety precautions at nuclear power plants is probably way over the top compared to what is needed.

    Even the guardian allowed an article on the absurd fear of nuclear promoted by greenies.
    https://www.theguardian.com/science/blog/2016/apr/11/time-dispel-myths-about-nuclear-power-chernobyl-fukushima

    Obligatory genuflecting to the anti fossil fuel gods, but quite critical of Greenpeace.

  19. BorisG

    all correct about fracking but

    Indeed, the success of the technology in the US is attributed by Kathleen Hartnett White to “American exceptionalism” whereby politics has a smaller footprint than in other countries.

    Greatly aided by extremely favourable geological conditions such as overpressure.

  20. BorisG

    The US has had its own stupid green regulations, in particularly, oil and gas export bans.

  21. Barry Bones

    Alan,

    Half truths once again.

    The key driver in the cost differential are not moratoriums but basic geology.

    The Americans have wet gas (meaning you drill for gas and you get a nice little by product called oil). In Australia, we have dry gas (no oil).

  22. nemkat

    Even so, the cost of safety precautions at nuclear power plants is probably way over the top compared to what is needed.

    Once the coal stations are gone Nuclear will be viable.
    That’s provided everyone pretends that there isn’t an issue about storage of nuclear waste, and ignores te effects of contaminated water on the food chain.h

  23. Herodotus

    These differing outcomes stem solely from political interference resulting in Australian bans on exploration. These are in response to an unholy left-right alliance that has spooked politicians into prohibiting the fracking technology (all gas development in the People’s Republic of Victoria) virtually everywhere outside of Queensland. With over two million wells sunk worldwide without mishap and numerous scientific reports seeking to allay alarmists’ fabricated fears, the fracking technology has a pristine bill of health. But the power of green fomented hysteria has proven to be too formidable in Australia.

    Any “media doesn’t matter” types here?

  24. Tezza

    For Genghis
    #2745093, posted on June 23, 2018 at 10:50 am
    look at the US and see how its substitution of gas for coal in power generation has lowered CO2 emissions (faster than Obama planned, and without his draconian directives) while giving the US very cheap power.

    Personally, I don’t care about CO2 emissions, but if you do, the US experience definitively lays your concern to rest.

  25. BorisG

    That’s provided everyone pretends that there isn’t an issue about storage of nuclear waste, and ignores te effects of contaminated water on the food chain.h

    is water in France worse than in Australia?

  26. NuThink

    Yes BorisG – water from France is full of Carbon Pollution – remember that Adelaide until recently (mid 80’s) had terrible water – so bad that it was compared to Aden in the Middle East. I still recall it being brown in the mid 80’s (1980s not 1880s) out of the tap in Adelaide. We only got rid of our water filter 11 years ago when we moved house.

    https://www.newspapers.com/newspage/120634394/
    Sep 22, 1988 – By EDMUND DOOGUE, Adelaide r r OD made only water, OOff 1 but man … You have probably heard the story that when P&O liners crossed the seven seas, there were only two ports where they didn’t take on water. Aden and, yes, Adelaide. The tale is more than apocryphal, according to a shipping agent, …

    Then there is water from France – since 1863. Full of dare I say Carbon Pollution. Exported to 140 countries.

    The spring from which Perrier water is sourced is naturally carbonated. Both the water and natural carbon dioxide gas are captured independently. The water is then purified, and, during bottling, the carbon dioxide gas is re-added so that the level of carbonation in bottled Perrier matches that of the Vergèze spring.[1][2]

    As of January 2013, Perrier was available in 140 countries, and almost 1 billion bottles are sold every year. [13]

  27. NuThink

    BTW BorisG, this week in Adelaide alfalfa was taken off the market because numerous people became very sick with salmonella poisoning, 7 needing to be treated in hospital. Recall the deaths while back from small goods in Adelaide. Food is not so safe in Australia as some believe.
    http://www.abc.net.au/news/2018-06-20/salmonella-outbreak-from-sprouts-sa/9891044http://www.abc.net.au/news/2018-06-20/salmonella-outbreak-from-sprouts-sa/9891044

    Then 6 months ago
    https://www.adelaidenow.com.au/news/south-australia/gawler-salmonella-toll-rises-to-35-with-nine-victims-in-hospital-and-may-rise-further-authorities-warn/news-story/9db76b930e4f3e2bae40adc1bbf874d9

    http://www.abc.net.au/news/2011-11-22/garibaldi-e-coli-contamination-legal-case/3686838

    In 1995 a number of people became sick and four-year-old Nikki Robinson died in Adelaide after eating smallgoods contaminated with E.coli bacteria.

    The surviving victims were children and many continue to suffer severe health problems, including some who have had organ transplants.

  28. nerblnob

    Let’s not forget the devastating effect on tourism that nuclear power stations have.
    So much so that France is only the most touristed country in the world.

  29. cohenite

    That’s provided everyone pretends that there isn’t an issue about storage of nuclear waste, and ignores te effects of contaminated water on the food chain.h

    Thorium and IFRs.

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