Article by Robert Gottliebsen courtesy of the Australian.
The Victorian Energy Minister last week issued a statement that must rank among the most misleading made by a federal or state politician in recent times.
The minister was misleading gas users both in Victoria and NSW but I fear she also misled the Federal Energy Minister Chris Bowen, whose gas price curbs are a mess because the gas supply situation is totally different to coal.
Victorian Shadow Minister for Energy, David Hodgett is well aware of Victoria’s vast on shore low cost gas reserves that do not require fracking. They and are unique in the world because a co-product from the deep reserves is water, that can be used to help farmers avoid droughts and foster the growth of carbon absorbing plants.
On Channel 7 news last week Hodgett declared: “Talking with industry and business there are (gas) supplies there – onshore supplies – that the government could be working in partnership with industry to open up”.
Victorian government Energy Minister Lily D’Ambrosio snapped back with her misleading statement: “His solutions are not solutions they were solutions that were effectively about looking for onshore conventional gas which we know does not exist in Victoria”.
D’Ambrosio’s so-called “conventional gas” is gas trapped in naturally porous reservoir formations that are capped with impermeable rock.
But Victoria’s immense gas reserves have never claimed “conventional” status — they are much better than “conventional gas”. And because Victoria’s gas doesn’t require fracking it’s nothing like the “unconventional” gas in Queensland and NSW.
Victoria’s reserves are alongside a national pipeline. The reserves were calculated by world-renowned gas and oil reserve estimator MHA Petroleum Consultants, now part of the giant Sproule group.
But there is a caveat. They require about six wells to be drilled to make sure that the water and the gas flows to the surface.
Australia’s three main sources of local gas are Bass Strait plus the Cooper and Surat basins. Both the Cooper basin and Bass Strait are in decline and production costs are rising sharply. Where a country has a shortage of domestic gas reserves what is required is an increase in production not price clamps. And as it happened most of the local gas has been advance sold for 2023 — usually at prices below Bowen’s clamp level.
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Australia is fortunate that there are three major fields that will end the shortage of gas for domestic market.
The first is the Victorian fields which are the lowest cost and will generate low carbon gas by utilisation of the water. The second is Narrabri which Santos has been trying to develop for years but constant obstacles keep emerging.
In the Surat, Senex Energy, which is owned by Gina Rinehart’s Hancock Energy and South Korean steelmaker Posco, last year announced a $1bn expansion mainly for the domestic gas market.
When Bowen announced the price clamps Senex mothballed the expansion.
Of the potential new fields Victorian looks the best but Santos and Senex might disagree. More gas can theoretically be piped down to from the Queensland export fields at the expense of China and Japan contracts but both countries would be entitled to be very angry given the abundance of local gas. The pipeline network would require substantial investment to transport large quantities to Victoria, but if Victoria’s low cost gas is developed in can go north.
It’s time to stop misleading and tell the truth: governments don’t want to develop new gas reserves because of pressure from the Greens.
Rather than stopping development via price clamps or misleading statements they should state their policy and instruct all companies or households that use gas to either use electricity or close. Electricity sources like wind, solar, hydro and batteries require massive capital investments if they are to be expanded. To date those capital costs have been masked by subsidies.
One suggestion is that the profits that are being made on Queensland export contracts should be used to subsidise NSW and Victoria. Queensland export gas producers lost a fortune via plant write downs and the current burst of profits will need to continue for a long time to recoup those losses.
Extending that scenario, the next step would be to ask gas companies to hand over part of their North West Shelf profits or even overseas profits to subsidise the costs of falling domestic gas reserves. Both actions would hit Australian minerals investment.
When governments either state or federal act in a way that deliberately misleads the public it damages our democracy. But it also damages the media when journalists are simply not courageous enough to take on state or federal ministers when they conceal their real motivations.
In Australia the Fourth Estate has a big responsibility in energy which it is not always honouring.
Also, the misinformation coming out of the Victorian government has farmers in Gippsland very concerned about the development of their gas.
It’s important that Gippsland farmers understand that no fracking is required and the water that comes to the surface is extremely deep — between 500 metres and 1200 metres — and well below the near surface aquifers that supply farmers.
The banned development included a substantial farmer income.
Farmers before approval are entitled to get an expert, who is not reliant on the Victorian government for revenue, to check my statements.
The first is the Victorian fields which are the lowest cost and will generate low carbon gas by utilisation of the water. The second is Narrabri which Santos has been trying to develop for years but constant obstacles keep emerging.
In the Surat, Senex Energy, which is owned by Gina Rinehart’s Hancock Energy and South Korean steelmaker Posco, last year announced a $1bn expansion mainly for the domestic gas market.
When Bowen announced the price clamps Senex mothballed the expansion.
Of the potential new fields Victorian looks the best but Santos and Senex might disagree. More gas can theoretically be piped down to from the Queensland export fields at the expense of China and Japan contracts but both countries would be entitled to be very angry given the abundance of local gas. The pipeline network would require substantial investment to transport large quantities to Victoria, but if Victoria’s low cost gas is developed in can go north.
It’s time to stop misleading and tell the truth: governments don’t want to develop new gas reserves because of pressure from the Greens.
Rather than stopping development via price clamps or misleading statements they should state their policy and instruct all companies or households that use gas to either use electricity or close. Electricity sources like wind, solar, hydro and batteries require massive capital investments if they are to be expanded. To date those capital costs have been masked by subsidies.
One suggestion is that the profits that are being made on Queensland export contracts should be used to subsidise NSW and Victoria. Queensland export gas producers lost a fortune via plant write downs and the current burst of profits will need to continue for a long time to recoup those losses.
Extending that scenario, the next step would be to ask gas companies to hand over part of their North West Shelf profits or even overseas profits to subsidise the costs of falling domestic gas reserves. Both actions would hit Australian minerals investment.
When governments either state or federal act in a way that deliberately misleads the public it damages our democracy. But it also damages the media when journalists are simply not courageous enough to take on state or federal ministers when they conceal their real motivations.
In Australia the Fourth Estate has a big responsibility in energy which it is not always honouring.
Also, the misinformation coming out of the Victorian government has farmers in Gippsland very concerned about the development of their gas.
It’s important that Gippsland farmers understand that no fracking is required and the water that comes to the surface is extremely deep — between 500 metres and 1200 metres — and well below the near surface aquifers that supply farmers.
The banned development included a substantial farmer income.
Farmers before approval are entitled to get an expert, who is not reliant on the Victorian government for revenue, to check my statements.