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.