GOT GAS: Running low on gas? Sell it to other states!
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So it has happened again, the Australian Energy Market Operator has been forced to trigger the emergency gas supply guarantee mechanism on concerns that Victoria was running out of the fossil fuel.
This followed confirmation that gas storage at the key Iona facility had dropped to a record low and would remain under an official system security threat until the end of September.
Reports indicated that this was due to New South Wales and Queensland gas buyers taking advantage of Victoria being the only state to retain the $40 per gigajoule price cap on gas – triggered at the end of May under Australia’s gas market rules – to snap up cheap(ish) gas.
Yes, you read that right – it is at least partly due to NSW and Queensland buying of gas stored at the Iona facility near Port Campbell that has brought Australia’s eternally troublesome yet unpunishable kid of a state down low.
And that bears the question, why are other states allowed to buy gas from Victoria when there’s a price cap applied on its gas?
The whole point of the price cap is to prevent wholesale prices from getting out of hand, so wouldn’t allowing other states to buy Victorian gas while the cap is in place defeat the entire reason for why it is in place?
Wouldn’t it make more sense to have a freeze on interstate gas buying (at least outwards from the state with the price cap)?
With concerns about Australia’s gas supply, Australia’s upstream oil and gas representative body the Australian Petroleum Production and Exploration Association has been quick off the mark to spruik the benefits of the Beetaloo Basin as the answer to all our ills.
APPEA told the ABC that the Beetaloo had enough shale gas to provide Australia with a secure supply of gas for the foreseeable future.
There is no doubt there is enough gas in the Beetaloo, which is why it was one of the leading lights of the Morrison Government’s gas-led recovery plan.
Got Gas’ problem with the Beetaloo has not changed since the days of pulling apart the Coalition government’s ostensible goal of powering Australia’s recovery from COVID by focusing on developing of gas resources.
Given how much of a share gas has in Australia’s energy mix and the recent issues faced by the East Coast in recent months, there is absolutely nothing wrong with trying to ensure there is enough gas to keep the lights on.
What Got Gas has an issue with is any belief that developing Beetaloo gas will be timely or cheap.
Beetaloo gas is contained in shale reservoirs, which requires expensive fracture stimulation to develop as well as more wells to achieve the same types of flow rates that a conventional gas well would be able to achieve.
To top it off, shale well production tend to decline faster, necessitating the drilling of more wells to maintain production.
What all this translates to is gas that might well be more affordable than the insane wholesale prices that the East Coast is seeing now, but certainly not cheap either.
The time frame required to bring this gas to market means that it is pretty unlikely to assuage the current crisis (though it might be invaluable for the future).
Additionally, the energy transition makes for a limited shelf life, which makes industry calls for government support questionable. Why should the government back infrastructure that has a limited shelf life?
In this era when the world is moving increasingly towards zero emissions, the decision on whether new gas developments go ahead or not should be left entirely to supply and demand.
While we would typically have ended at this point, the Northern Territory government chose today (July 21, 2022) to put out a commitment statement with Japanese LNG producer Inpex that could see an increase in LNG production from the Darwin LNG project while committing to a net zero emissions future.
How would this be achieved you ask?
Through the magic of carbon capture and storage, with Inpex agreeing to create a multi-user hub at the Middle Arm Sustainable Development Precinct.
Now the Japanese company might just be able to pull the feat off of implementing a successful CCS project to handle the emissions both from Darwin LNG and its expansions (and presumably other industries in Darwin), but one can’t help but look at the deplorable example set by Chevron over on Barrow Island.
The CCS component of the US supermajor’s giant Gorgon LNG, which was a key condition for the project’s approval, is still underperforming – badly.
While originally supposed to sequester 4 million tonnes of carbon dioxide, or 80% of the emissions from the LNG plant, each year, it has struggled to make it to half-year mark.
And that’s not even taking into account that the CO2 injection didn’t start until August 2019 when it was supposed to be up and running from July 2016.
A generous person might say that some sequestration is better than no sequestration at all.
However it is clear that any promises about CCS needs to be taken with a healthy pinch of salt and that Inpex will need to maybe look at Chevron’s experience and double the planned CO2 capacity in order to actually achieve its goal of net zero emissions from its upstream operations.
Who knows, they might do a better job than Chevron and wind up with extra capacity. Maybe.