Why Australia is starting to rethink the role of natural gas in its energy future

A major questioning and rethinking of the role for natural gas in Australia’s 21^st century energy mix is under way, with or without participation from government policy-makers.

This trend is explored in a new discussion paper – ‘What About Gas?’ – which will be released at a business forum in Melbourne next week (Sydney a few weeks later) by Green Capital, the sustainability engagement program of the Total Environment Centre.

An extensive review of gas-related issues in Australia by Green Capital over six months suggests that the reality on the ground may be very different to official forecasts of ongoing steady growth in the domestic energy market.

The Australian Government’s current Energy White Paper process and its main forecasting agency, the Bureau of Resource and Energy Economics, appear to be substantially detached from the fast-evolving gas situation.

The big questions that are now bubbling up from energy experts, environmental campaigners, investors and others point to a whole new set of factors that need to be evaluated by officialdom and the markets, including:

• Has the potential for new reserves from unconventional sources such as coal seam gas (CSG), shale and ‘tight rock’ been heavily overestimated given the lived experience economically, socially, environmentally and politically?
• Is the tradition of past decades of treating gas as an ‘essential service’ – to be reticulated in suburbia alongside electricity, water, sewage and waste services – becoming obsolete?
• Should the promotion by governments and the industry of gas for household cooking and heating as a lower-cost, lower greenhouse gas pollution alternative to electricity from predominantly coal-fired generation be revised?
• Is the key role for gas as a bridging fuel in the transition to a low or zero carbon economy shifting for Australia from displacing coal-fired electricity to substituting for diesel fuel use in transport, especially heavy trucks and shipping?
• What is the hard timeline for carbon capture and storage (CCS) technologies to be deployed commercially, if ever?
• What is the potential for biogas and landfill gas production to be increased to replace fossil fuel gas while using the same distribution infrastructure, including for distributed co- and tri-generation projects?
• How much scope is there for gas energy efficiency by industrial and commercial consumers to counter rising gas prices and supply constraints, as an alternative to controversial calls for domestic reservation of gas reserves or fast-tracking of new gas fields?

The approach adopted by Green Capital’s ‘What About Gas?’ investigation has been deliberately neither pro-gas nor anti-gas, opting instead laying out the issues  from a systems thinking and sustainability perspective – economic, social and environmental.

The already heated debate over the role for gas is coming to a head in 2015 because three of the world’s first ‘LNG from CSG’ export plants are opening this year in Gladstone, Queensland.

This means the once sleepy, landlocked and relatively low-cost Australian east coast gas market is being joined to global energy markets and oil-linked international pricing for the first time. East coast demand is projected to treble, and wholesale gas prices could double or more.

The gas industry itself and the main Australian business lobby groups believe that the solution to Australia’s future gas needs lies predominantly in opening up unconventional reserves, first shallow CSG and then the deeper shale and ‘tight rock’ resources that have underpinned America’s recent gas surge.

Farmers, other landholders and environmentalists, however, have presented unprecedented opposition to unconventional gas expansion, rejecting any notion that the economic case for gas supply for domestic and export markets should trump the integrity of water aquifers, farmlands and biodiversity.

Governments are now caught between gas advocates and opponents, and the political responses are creating a confusing and sometimes chaotic policy and regulatory stew.

The economic dream is for Australia to become the world’s top LNG exporting nation before 2020, with massive revenues anticipated over decades to come. But the ‘What About Gas?’ discussion paper poses the overarching sustainable development challenge: Does this ambition have economic, social and environmental feet of clay?

*Murray Hogarth is senior adviser to Green Capital, which is hosting the ‘What About Gas?’ business breakfast series – Melbourne March 25 and Sydney April 22 – www.whataboutgas.com