Gas is back - if it ever went away.
Author
Samantha Hepburn
Professor, Deakin Law School, Deakin University
Yesterday, the Albanese government doubled down on gas with the release of its Future Gas Industry policy.
Under this proposal, gas will be part of our power mix until at least 2050. New gas fields will be opened to avoid the supply problems that have bedevilled east coast users. And our gas exports will remain a source of income and diplomatic power.
What about climate change? Well, the strategy is littered with references to low-emissions gas, carbon capture and storage, decarbonisation and the need to shore up energy supply as coal departs the grid. As it states:
Continued gas development and more flexible gas infrastructure is needed to increase the resilience of Australia's energy system and keep costs down as we transition.
But this is a fig leaf. We cannot open new gas projects and still meet our climate goals. If we want to make sure we have enough domestic supply on the east coast, we could simply reserve some of our export gas, as Western Australia has done.
Having your cake and eating it too
Gas still supplies more than a quarter of Australia's power within the National Energy Market. By 2028, the report forecasts supply shortages will begin to hurt the east coast. But this supply crisis could be solved easily with a WA-style reservation policy, where a percentage of gas extracted from existing supply is mandated to be reserved for the domestic east coast market. The fact the government is not pursuing this option means the supply crisis is of our own making.
Cynics would say the domestic supply issue is a cover for vastly larger interests, namely the A$17 billion liquefied natural gas (LNG) industry which sells about 90% of our gas overseas with demand for LNG in the Asian region expected to continue until 2050. Over the past decade, our LNG exports have risen sharply. For several years, Australia was the world's top exporter, competing directly with the likes of Qatar. Gas now accounts for 14% of our export earnings.
Last year, we exported 80 million tonnes of the stuff - roughly 114 shiploads. That's the first drop in production since 2015.
The reason? Production is likely to have peaked. Many gas fields are running dry, and exploration has slowed. Late last year, the oil and gas industry put out a report stating:
investment in supply is also required to meet current long-term LNG commitments with the current committed and anticipated production also declining over time to below contracted levels in the medium-term.
Now we have a new government strategy, calling for renewed exploration and development.
Is there a role for gas?
The gas industry would, of course, like us to keep using gas for as long as possible. But how does that square with the need to get to net zero as soon as possible? To meet Australia's commitment to net zero by 2050, emissions from gas must be reduced.
As Federal Resources Minister Madeleine King says in the foreword to the new gas strategy:
Under all credible net zero scenarios, natural gas is needed through to 2050 and beyond, though its production and use will change over this period[…] Gas will be a transition fuel that firms renewable power generation and is required for manufacturing and minerals processing until such time as alternatives are viable. Gas can support our future made in Australia. However, the greenhouse gas emissions associated with gas must sharply decline and where gas use cannot be reduced, emissions must be increasingly abated and offset.
This has some truth. We cannot simply turn off the gas pipelines overnight for our domestic consumption. Homes still use gas. Industries rely on it. Gas peaking plants have taken up some of the slack left by coal leaving the grid. Development of lower emission alternatives such as biomethane, hydrogen gas, pumped hydro, batteries and other bio-fuels will take time, especially for industrial use.
The report envisages the steepest domestic falls in demand in east coast buildings, which essentially means Victorian homes, as the state most reliant on gas. Here, the state government has signalled it wants to end this reliance. But the report sees industrial demand remaining high due to a lack of alternatives, and an increase in gas demand on the west coast for new industrial users, such as fertiliser plants coming on line, which will use gas as a key feedstock.
So is the government actually planning for the time when gas stays safely in the ground, where it does not add to corporate coffers and also does not add to the tally of planet-warming gases?
Not exactly. Under the most ambitious emissions scenario in the report, the government foresees global demand for gas dropping 30% by 2043. That's almost two decades away, and a 30% drop is not much on that kind of timescale. Further, the report states gas "underpins a wide range of economic activity in Australia and globally, with secure gas supplies being a core component of energy security." So, our Future Gas Strategy will continue to be aligned with the production and export of gas, despite out Net Zero commitments
What's also clear in the report is the importance this government places on gas as a geopolitical tool. In the wake of Russia's invasion of Ukraine, global gas prices skyrocketed as major gas consumers scrambled to find alternative supplies. By and large, they have - and Australia is one of the beneficiaries of the global gas grab.
As King notes in her foreword:
Australia is and will remain a reliable and trusted trade and investment partner, including for liquefied natural gas (LNG). Our trade partners have made large investments over decades in Australia's resources industry.
The Greens, teals and independents have seized on this report as evidence the government is simply doing whatever the gas industry wants. Vocal independent David Pocock described the strategy as "morally bankrupt".
It's hard to write that line of argument off completely. As the International Energy Agency has said, large new fossil fuel projects are simply not compatible with cutting emissions and tackling climate change.
Samantha Hepburn does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
