Does Victoria really need to find more fossil gas to use as plastics feedstock?

At a recent community-consultation held in Drumborg Victoria, a representative of the Victorian Gas Program stated that one reason to be exploring for more fossil oil and gas in Victoria is because:

“We need to find more gas so we’ll have feedstock for Victorian plastics manufacturers” or words to that effect. (The discussion was not video recorded.)

But is “feedstocks-for-plastics” a good reason to be chasing more Victorian fossil fuels? Is it a good reason to impact productive Victorian farming communities? Time for a fact check.

The Victorian Gas Program – Another $42.5 million subsidy for the fossil fuel industry

The Victorian Government’s “Gas Program”is spending $42.5 million to assist oil and gas companies in finding more fossil fuels. The Program has flown aerial gravity surveys over large rural areas of eastern and western Victoria.

The results of these surveys will be released in the coming months. Fossil fuel proponents are likely to call for even more invasive fossil-fuel exploration activities such as seismic testing and appraisal drilling.

These Victorian-taxpayer-funded investigations are taking place despite these rural areas of Victoria being known for their high agriculture and forestry productivity, despite the fact we have already found enough fossil fuels to thoroughly cook planet Earth,and despite hundreds of thousands of Victoriansmarching in the street demanding investment in cleaner industries.

The Victorian government claims it wants to seegreenhouse-gas emissions fall, but it’s difficult to reconcile that stated ambition with the Victorian Gas Program.

With that introduction, let’s delve into how plastics are made in Victoria and what feedstocks are used or could be used.

Making plastics in Altona

Victoria’s predominant plastics producer is the company established by ExxonMobil in the 1960’s and 1970’s with chemical plants located in Altona Victoria. The company is now known as Qenos and is now foreign-owned by China’s Bluestar Group.

What does Qenos use as feedstock for plastics manufacture? From its webpage, “Qenos “processes ethane feedstock sourced from Bass Strait into around 205 kT [kilo tonnes] of ethylene per year…”.

Qenos, like many other petrochemical factories around the world, uses ethane and “steam-cracking” technology to produce the chemical intermediates ethylene and propylene. From these intermediates a range of plastics can be made such as polyethylene and polypropylene.

But from where does Qenos get its ethane?

Ethane – A plastics industry feedstock

Oil and gas wells in the Bass Strait produce a range of hydrocarbons. The lightest, methane, is the major component of the “natural gas” found in the pipelines running through our suburbs.

From those oil and gas wells also flow ethane, propane, butane and a range of heavier components right down to heavy oils, as well as non-hydrocarbon contaminants such as mercury, sulphurous chemicals, and carbon dioxide.

Ethane, the Qenos plastics feedstock, is a minor component in this mix. For example, 15 molecules of methane might come out of an oil and gas well for every 1 molecule of ethane. In other words, even if the Victorian Gas Program found a lot of gas (methane), it wouldn’t necessarily mean that it had found a lot of plastics feedstock (ethane).

Coal seam gas, as another example, is predominantly methane and contains hardly any ethane at all. Thus coal seam gas is of no use to Qenos as a plastics feedstock.

Despite ethane being a minor part of what comes out of an oil and gas well, as production from the Bass Strait developed back in the 1970’s, ExxonMobil (then known as Esso) and its joint venture-partner BHP included at their Gippsland (Longford) and Mornington Peninsula (Long Island Point) gas-processing-facilities the special ability to separate-out ethane from the other hydrocarbon components.

This ethane was then supplied to Qenos (then known as the Altona Petrochemical Company) and to Huntsman Chemicals (now closed). A dedicated ethane pipeline from Long Island Point passes beneath Port Phillip Bay to Altona and has been transporting ethane as a specialty intermediate product since the 1970’s.

How much longer will Qenos continue to operate in Altona?

As a business, Qenos (and so we can say Victoria’s “plastics industry”) faces a range of business challenges.

First of all, the scale of the Altona operations are tiny, 1/15th the size of state-of-the-art plastics plants overseas. There has been no major expansion at Altona since the 1970’s.

Secondly, the Qenos facility is quite aged, with some equipment dating back to the original 1960’s operation.

Next, this industry must purchase not only ethane (for feedstock) but also “natural gas” (methane), the burning of which heats Qenos’ steam-cracking furnaces. Of course, it is now well knownthat with the 2015 start-up of the liquefied natural gas (LNG) export plants in Gladstone Queensland, the price industry must pay for gas has skyrocketed all along the interconnected eastern-Australian gas network.

In addition to rising fuel costs, even worse for Qenos is that the price Qenos pays for ethane feedstock is likely to be contractually linked to those same high gas prices. That is because although “gas” or methane cannot substitute for ethane as a feedstock in Qenos’ plastics operations, ethane cansubstitute for methane as a fuel.

Indeed, if ExxonMobil did not separate ethane out of the gas/oil mix at its Longford plant, that ethane would be sold admixed with methane as “natural gas”.

Now, as a fifth blow to Qenos’ future, in an abrupt move, ExxonMobil has declared to the Australian Energy Market Operator (AEMO) that gas production from the Bass Strait (and therefore ethane production as well) will fall dramatically starting in 2025.

Charts from AEMO’s 2019 Gas Statement of Opportunities showing dramatic fall in gas production in 2025.

The 2025 drop in Bass Strait gas production is because the legacy “sweet” gas fields such as Bream, Barracouta, Marlin, Tuna, Flounder, and most importantly the largest gas field of all, Snapper, will by then be depleted. No one ever said Bass Strait was going to last forever: only 50 years or so.

Following a recent but unsuccessful drilling exploration program, ExxonMobil has now put its share of Bass Strait up for sale. This then leaves Beach Energy or Santos or another potential buyer to carry on for a few more years producing gas (and if Qenos continues, ethane) at reduced rates, from the carbon-dioxide contaminated / constrained Turrum and Kipper fields.

If Qenos (or you could say Victoria’s plastics industry) stays on this fossil fuel-and-feedstock path, the future doesn’t look bright. So how will the Victorian Gas Program fix all that?

Answer: it won’t.

The Victorian Gas Program won’t save the Victorian plastics industry 

The Victorian Gas Program won’t make the Qenos facilities larger. Nor will the Victorian Gas Program make the Qenos facilities newer.

The Victorian Gas Program, even if it does lead to some new production of oil and gas from Victoria’s productive farmlands, nevertheless won’t bring down the price of gas burned as fuel by Qenos and other Victorian industry. The price of eastern-Australian gas will continue to be set by those that export Australian gas overseas.

Furthermore, the Victorian Gas Program is unlikely to find “another Bass Strait”, which is what Qenos needs post the 2025 Bass Strait decline. Because ethane is only a minor component of the entire mix of components that comes from an oil and gas well, it would take the discovery of very large Bass-Strait-replacing gas fields to sustain Qenos post 2025.

And finally, even if such a find were made, if this find is not located in the vicinity of the existing ExxonMobil Longford ethane-separation plant, some commercial interest would have choose to invest in building the new ethane-separation equipment needed to produce the specialty ethane feedstock to which Qenos is accustomed. It’s difficult to see any investor considering ethane separation to be a strategic investment.

Victoria – No longer the place for manufacturing fossil-based chemicals

Globally, fossil-ethane-based petrochemical facilities are generally found where gas and ethane are cheaply available. This was the case in Victoria in the 1970’s when the petrochemical industry in Altona expanded.

But with the recent increase in eastern-Australian gas prices, those days are gone. Even in Western Australia, where large volumes of fossil hydrocarbons have been produced over many decades, no investors have been interested in separating out ethane for chemical use.

Converting waste plastics to oil, to be used again to make plastics. Now that’s an idea.

Rather than spending $42.5 million of taxpayer money on chasing damaging fossil fuels, that money could have been spent developing the following “kill-two-birds-with-one-stone “ idea.

Victoria, like just about everywhere else in the world, has a waste-plastics problem. Waste plastics can be re-converted to a form of oil, from which plastics can be made again. Where could this re-conversion take place? At the Qenos facility in Altona.

Qenos has not always relied on ethane as a plastics feedstock. Before oil and gas was discovered in the Bass Strait, the original Altona equipment “cracked” a form of oil from the nearby PRA refinery in order to make the chemical intermediates ethylene and propylene. In the coming years Instead of using fossil ethane, the Qenos Altona facility could instead convert oil made from plastics, back into plastics.

Turning waste materials back into the materials they started out as is part of the “circular economy”. Applying circular principles is one way we can sustain our jobs, livelihoods, and economy while positively responding to the Climate Emergency.

Avoiding mis-leading statements

Representatives of the Victorian Gas Program should not imply that exploring for more fossil fuels in Victoria will help the long-term viability of plastics manufacture in Victoria.

Such statements are mis-leading when one considers the potential outcomes from the Victorian Gas Program; in other words, the Program is unlikely to discover “another Bass Strait” of a scale that could sustain Victorian fossil-ethane based plastics manufacture.

Furthermore, such statements and the entire concept of the Victorian Gas Program are out of touch* with Victorian’s interests in a safe, healthy, productive, sustainable, and regenerative future.

“An Age reader’s poll revealed 85 per cent supported the Extinction Rebellion protests.”

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The author worked for many years in Victoria’s petrochemical, oil, and gas industries.