Australia's Natural Gas Dilemma

australia is the world's leading exporter of liquefied natural gas or lng in 2020 the country exported 25 billion dollars worth of natural gas to markets in asia interestingly enough the country also occasionally suffers from natural gas shortages in their own markets at home it's a demonstration of the country's sprawling size bountiful natural resources and complicated energy politics in this video i want to talk about how the land down under became one of the world's biggest natural gas exporters australia is known to have significant amounts of proven natural gas reserves about 3 trillion cubic meters worth in conventional reserves if you add in unconventional gas fields like coal seam gas and shale gas which are not generally included into estimates the country may have as much as 12 trillion cubic meters in total unfortunately much of this gas is unevenly distributed almost 80 percent of the country's conventional gas resources are concentrated in its northwest for the majority of its history australia has exported coal to its trading partners abroad and reserve natural gas production for its own domestic use australians have been mining coal since the 1800s and started exporting their production after world war ii today australia is the world's second biggest coal exporter second only to indonesia of all places when the country's first commercial gas field went online in the 1960s natural gas was seen as a premium fuel supply with low pollutant characteristics especially when compared to coal australians started using it to generate electricity and conduct industry let's pause a bit to talk about gas natural gas is a complex mix of hydrocarbons and non-hydrocarbons mostly methane but also with a lot of hexane ethane propane butane hydrogen sulfide and so on it is odorless colorless and lighter than air scientists believe that it comes from organic matter trapped within sediment deposits many years ago like the salmon it travels from the source rock where it spawns to underground formations called reservoir rock geologists categorize natural gas fields into two buckets conventional and unconventional conventional gas describes free gas trapped in porous reservoir rocks like carbonates sandstones and salt stones unconventional gas is an umbrella term that covers everything else i know really creative these are generally found while searching for other fossil fuels and are more difficult to tap they might be trapped in tiny pores within shale rock deep underground shale gas or they might be absorbed and trapped near the surface in cold deposits coal seam gas one of the major problems with natural gas is that it can be relatively difficult to transport gas reserves have historically been located very far from the population centers where they are used so safe and reliable transportation methods are necessary for almost a century the industry used pipelines they are very convenient and economical for shorter distances but lack flexibility furthermore their construction is often intercontinental and politically controversial for longer distances beyond 700 miles oversea or 2 200 miles on land liquefied natural gas makes more economic sense when you cool natural gas to negative 260 degrees fahrenheit under normal atmospheric temperature it turns into a condensed liquid in this form gas takes up 1 600th of its former volume and is far easier to transport in tanker ships or trucks the most significant downside of the lng approach is the need to build expensive liquefaction plants a big upfront costs there are other ways to transport natural gas but pipelines and lng make up the majority of the market critically australia a very large country does not have an integrated nationwide gas pipeline system this 47 thousand kilometer patchwork quilt is made up of three largely separate subsystems the northern western and eastern markets each one of these markets are largely separate from one another they rely on their own local natural gas fields and transport gas through their own pipeline systems this patchwork system exists because of physical distance and varying regulatory regimes and it contributes to a significant national energy security problem australia cannot get the natural gas from where it is plentiful to where it is most urgently needed in the 1960s and 70s it became an issue as new natural gas fields were discovered one large gas field in central australia was attracting foreign interests from as far away as california this foreign interest sparked feelings of economic nationalism and in 1970 australia's right-leaning federal government imposed a general export embargo on liquefied natural gas this was to make sure that australia's own domestic requirements came first but then came the northwest shelf venture the northwest shelf project started off as a joint venture between a mix of australian players like woodside petroleum and mid-eastern oil as well as some foreign multinationals burma oil royal dutch shell british petroleum and a company called california asiatic oil in the mid-1960s the joint venture received a license to explore a vast area in northwest australia for many years they experienced little success which put financial strain on the marriage some of the venture partners dropped out replaced by others but then finally in 1971 success natural gas was discovered at scott reef an atoll-like reef about 270 miles off the coast of western australia additional large discoveries were then made at north rankin and goodwin some 80 miles off the western australia industrial port city of dampier those two fields combined were estimated at the time to have over 300 billion cubic meters of natural gas these three discoveries offered more than sufficient natural gas supplies to supply the western australian market in which they were located thusly the joint venture members started pulling together a massive 12 billion dollar project to develop these resources build an lng plant and begin exporting lng into the world market however there was a problem the nationwide natural gas export ban was still in effect the federal government at the time was left-wing and among other things resented the involvement of foreign multinationals in the lng project they requested at least 50 percent local ownership natural gas projects are complicated capital intensive things woodside northwest shelf's primary operator was an australian company but they needed foreign funds and expertise to fully exploit the resource so long that the natural gas export ban was in effect the project would not move forward the western australian market was far too small to justify the billions of dollars needed to develop the project well what about australia's other two markets again the problem was distance and the lack of an integrated pipeline system it is roughly 3202 miles from dampier to sydney longer than the distance between los angeles and new york city this was too far for private actors to build an economically sustainable pipeline leading to a form of economic gridlock the whitlam federal government proposed to build a national pipeline grid and in 1973 they took over an ongoing 1 200 mile pipeline project from mumba to sydney as part of that project that project faced substantial political environmental challenges it took three years to complete with some additions afterwards by then however the political tides had turned once more in 1975 the australian government changed seats and a more right-leaning and business-friendly regime entered power they were more eager to see energy projects get started one by one the previous obstacles fell away first the local ownership threshold proposals were floated to redefine what it means to be an australian company but the venture reached the 50 local ownership threshold naturally burma ended up selling their ownership stake to the australian mining giant bhp the big australian so in 1977 the federal government lifted its export embargo and allowed the northwest shelf venture to move forward they noted the government has decided that it will continue its policy of allowing exports of reasonable quantities of gas but exports will be permitted only after the government is satisfied that domestic requirements of gas and gas liquids have been considered to start the northwest shelf venture was allowed to export 50 percent of its gas production the western australian state government was enthusiastic they would be able to receive natural gas supplies for perth to replace the declining don gara field the state governments in australia's eastern markets the country's largest were disheartened they apparently had been hoping for the nationwide gas pipeline project to move forward and finally to grease the rails the new government kicked in a few tax benefits they extended an existing 20 investment allowance two more years introduced an income tax rebate and waived several other oil and resource taxes in 1978 the venture struck deals with eight large japanese customers to supply japan with liquefied natural gas buoyed by favorable oil market conditions the iranian revolution had just occurred that year the project started construction in 1980 the northwest shelf venture was australia's biggest project to date and for a time it had been the world's single biggest engineering project built in two phases it involved offshore platforms undersea gas pipelines a massive lng plant capable of processing 12 million tons of natural gas each year 800 million australian dollars worth of lng tankers and a pipeline from dampier to perth australia has long been sensitive about the percentage of its materials made locally in this case the lng tankers were built outside the country but the rest were over 75 locally sourced the first lng exports started heading to japan in 1989. japan has been a regular customer ever since later joined by the people's republic of china together the two countries purchased 75 percent of australia's output today the gas fields of western australia still make up a vast majority of the country's proven reserves about 80 percent over 25 billion dollars to date have been invested in the project including the massive gorgon gas project the northwest shelf project coming online was a good thing for the state of western australia the project is required by law to reserve a significant portion of production for domestic use so natural gas provides 64 percent of the state's energy needs the country's two other markets the northern and eastern face bigger supply challenges and particularly the eastern market which covers brisbane sydney adelaide melbourne and hobart basically australia's biggest and fastest growing cities additionally australian energy demand at home is growing at a very fast pace on average consumption has grown at about 0.6 percent annually driven by increased industrial demand despite being the 55th largest country by population australia's electricity consumption per capita ranks 19th in the world australia's energy mix has drastically changed in recent years as the country lurches towards renewables wind and solar energy's contributions have surged from 2 in 2010 to 18 in 2020 renewables have taken share largely from coal falling from 81 to 67 and a little from natural gas which makes sense since coal tends to be the dirtiest carbon wise anyway the australian energy market size and rapid growth nevertheless incentivized new developments in unconventional natural gas particularly coal seam gas the southern and eastern regions of australia lack conventional natural gas fields but do have a lot of coal and absorbed within the natural seams of this coal are large deposits of methane a natural gas mining the coal releases this methane which is a workplace hazard to say the least so companies vented it into the atmosphere methane has global warming potential 21 times higher than carbon dioxide so this is wasteful and polluting throughout the 1970s and 80s companies like conoco australia mitsubishi and houston oil and minerals have tried to harness this methane for commercial production finally in 1996 bhp broke through at the bowen basin in queensland kicking off a coal scene gas boom in eastern australia gas production grew ninefold due to domestic eastern market growth critically state governments have helped this along by pushing for a switchover from coal to gas for instance the queensland gas scheme in 2005 which required electricity retailers to produce 13 to 15 of their electricity from gas the bowen basin is one of the world's largest deposits of prime and delicious coal its coal seam reserves can conceivably serve the eastern markets for many years but again the export markets beckoned the queensland state government approved three consortia to build lng plants and export coal seam gas to the asian markets the first of these plants operated by santos came online in december 2014 a second operated by aplng started in january 2016. today there are three lng plants operating out of curtis island in total capable of producing 26 million tons of lng each year this new capacity tapped into the region's currently existing energy export infrastructure to rapidly scale eastern australia is also relatively close to asia giving their lng a price advantage to balance out a relatively higher labor cost in 2020 australia dethroned qatar has the world's leading exporter of liquefied natural gas the two countries remain neck and neck for the lead spot the kangaroo country's rise has a natural gas export power combined with its reputation as a reliably western aligned country has greatly helped to stabilize the energy markets in light of recent events australia's natural gas exports are now more needed than ever yet at the same time its domestic markets face significant energy shortages and rising prices impeding growth and causing political awkwardness there are plenty of ideas floating around a transcontinental pipeline a gas reservation policy nationwide so on but there is no silver bullet and australia's natural gas dilemma won't be fixed until the country can incorporate all of these ideas into a coherent nationwide strategy all right everyone that's it for tonight thanks for watching subscribe to the channel sign up for the newsletter and i'll see you guys next time

Channel: Asianometry

Views: 327,234

Keywords:

Id: 2PGV8fAyIrE

Length: 16min 29sec (989 seconds)

Published: Sun Sep 25 2022