Gas a stony outlook for Gorgon field

THE Western Australian oil and gas industry, now in an unprecedented period of growth, faces one problem for which no solution is in sight – Greenhouse emissions.

Petroleum has emerged as the State’s biggest industry, contributing nearly 40 per cent of earnings from resource projects (iron ore, once the leader, now provides 17 per cent.

Royalties from hydrocarbons contributed $345 million to the State’s revenues last year (double the year before) and the industry in this State produces half of Australia’s oil and gas, measured by value.

The recent, long anticipated approval of the fourth train for the North West Shelf’s LNG project was greeted with relief, after years in which Western Australian gas producers had been frustrated in winning new contracts.

But the $8 billion Gorgon project, off Barrow Island, is still some way from development.

One obstacle is the high level of carbon dioxide emitted as the gas is won from below the seabed.

This gas is a contributor to the Greenhouse Effect, and while natural gas is environmentally friendly, in that it produces fewer harmful emissions when burnt than coal or oil, Gorgon remains a problem.

This is because its gas holds about 20 per cent carbon dioxide, and in the past the State Government has made it clear it would not approve of its development unless a way can be found to reduce or offset emissions.

The gas can, theoretically, be reinjected into the seabed, but the water depth in which the field occurs, and other technical problems, would make this process prohibitively expensive.

There are suggestions that carbon dioxide emissions can be offset by planting forests (which, while growing, absorb the stuff) but this is also a challenging concept.

One hope for the consortium seeking to develop Gorgon is a series of recent discoveries in deeper water.

However the gas found in these has carbon dioxide concentrations of only 2-3 per cent, similar to that from the North West shelf projects to the north and most other Australian fields.

This is probably regarded as acceptable, and raises the question whether it is likely these new deeper discoveries will be exploited before those at Gorgon.

The greater water depth is, today, not an insuperable obstacle, and the fields are at least on a relatively flat seabed (Gorgon occurs as the continental shelf drops into that deeper water, meaning production wells would be drilled on the side of a slope).

Meanwhile the Gorgon partners, Texaco, Chevron, Mobil, Shell and BP, continue to search for local industries which could be customers, and also pursue LNG contracts in Asia and the U.S.

One possible outlet: A gas-to-liquids plant, being examined by Chevron and the South African company Sasol, to produce diesel fuel.

The Australian gas industry took some comfort from a statement made by John Howard last August, that the Federal Government would avoid Greenhouse policies and measures which distorted investment decisions between particular LNG projects and locations.

This was seen as allowing Western Australian projects to compete on a far more equal footing with countries such as Indonesia, Malaysia, Oman and Qatar, which are not subject to Greenhouse gas reducing restrictions

In the meantime, the global Greenhouse debate has been thrown into confusion by the American decision to reject the Kyoto Treaty, which aims to reduce emissions in the next few years.

While Australia has officially deplored this rejection, it will reopen the debate on how to ensure that industries in developed countries (subject to Kyoto restrictions) can compete with those in developing countries which are not.

Although the Europeans in particular have insisted that the thrust towards Kyoto objectives will continue, it is difficult to see how they can be achieved if the U.S., which produces nearly a third of the world’s carbon dioxide emissions, stands aside.

The Americans could point out that many so-called developing countries are the worst polluters – China, for example, with its huge population and great dependence on coal, a fuel which is one of the worst contributors to carbon dioxide emissions.

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