GOT GAS: Gas is here to stay under Australia’s net zero plans
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With all the hubbub surrounding the Australian government’s net zero pledge (some would shy away from actually calling it a plan at this stage) — it is clear that it remains committed to its controversial gas-fired recovery plan that has yet to bear significant fruit.
There are absolutely no plans to curb the use of natural gas, which might actually be a net positive given the energy crisis that has engulfed the Northern Hemisphere.
Rather, the government is counting on the arcane art of carbon capture and storage to magically lock away the carbon emissions produced by our natural gas industry and its revenue generating LNG exports, in order to meet its lofty goal of reaching net zero by 2050.
This, as previously pointed out before, is a misdirection despite Santos (ASX:STO) managing director Kevin Gallagher telling the 2021 United Nations Climate Change Conference (COP26) that CCS was the only way to reduce emissions from hydrocarbons at scale.
While CCS could play some role in abating carbon emissions, the technology as it stands is simply incapable of addressing all of our emissions without significant advances or funding.
This is best illustrated by the fact that while there are 25 CCS projects capable of storing almost 40 million tonnes of CO2 per annum, that’s a drop in the ocean compared to the 33 gigatonnes (billion tonnes) generated in 2019.
To make it worse, 10% of the current global capacity comes from the CCS project attached to Chevron’s Gorgon LNG project, which has not had the best track record to say the least.
However, we are not discounting CCS entirely. With sufficient political will and investment, CCS does have the potential to play a role in the broader offensive against carbon emissions and contributing to net zero.
The seemingly lack of real direction from the government also places the onus of carbon reduction (or elimination) on the private sector, which is more than capable of rising to the challenge with the right impetus (like shareholder pressure).
Some examples of how the private sector, and the gas industry in particular, is acting to reduce emissions include Woodside Petroleum (ASX:WPL) and its recently unveiled plans to develop a hydrogen and ammonia facility in southern Perth.
While critics are quick to point out that two thirds of the planned hydrogen production will be through natural gas reforming, the more realistic view would be that still leaves a third to be produced using renewable energy.
This is a substantial move from Australia’s largest LNG exporter and could well represent an early step towards emissions reduction moves, or even developing a new product that will replace LNG at some indeterminate point in the future.
There is also nothing to stop Woodside from either increasing the percentage of green hydrogen produced over time, or for it to aggregate green hydrogen from other producers.
Beach Energy (ASX:BPT) has also flagged plans to slash emissions by 25% over five years by reducing flaring, using renewable energy at its facilities and supporting Santos with its Cooper Basin CCS project.
Once again, while there will be some who say that is not enough to help achieve net zero, the practical position is that the company reducing its emissions by 25% is still 25% less that is going into the atmosphere.
In short, we are seeing the opening salvos from gas companies as they move to address their emissions.
While some of these moves may fall short, they could still serve to reduce emissions and certainly do not preclude further action down the track.