22/10/2008 - 22:00

Gas is part of the solution

22/10/2008 - 22:00

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THE long-running debate over Australia's energy future heated up again this week, and it's likely to continue running as the economy goes through its ups and downs.

Gas is part of the solution

THE long-running debate over Australia's energy future heated up again this week, and it's likely to continue running as the economy goes through its ups and downs.

The need for additional energy supplies is not going away. Economic growth rates will fluctuate but energy demand will continue to rise, as will the environmental pressures associated with supplying that energy.

Australia, like the rest of the world, has heard a lot of talk about increasing our use of clean, environmentally friendly energy supplies, including wind, solar, biomass and wave power.

But the fact remains that Australia continues to be overwhelmingly reliant on fossil fuels for power generation and that big picture reality is not going to change.

It's the same story overseas. An estimated 85 per cent of the global economy is powered by oil, natural gas and coal.

The important issue for Western Australia, then, is to determine the extent to which we use gas rather than coal for power generation.

The federal government's plans for an emissions trading scheme has focused attention on the merits of these competing fuel sources.

Premier Colin Barnett weighed into the debate this week when he floated the possible construction of a transcontinental gas pipeline from WA's north to the existing gas pipeline network in South Australia.

He said this was the best way to boost the use of gas, which he advocated as a clean fuel source.

"Obviously the way to do that is to have a transcontinental pipeline constructed," Mr Barnett told reporters.

"Pipelines basically are used from Siberia to Europe. They have criss-crossed the American continent for decades.

"Why in Australia can't we make some big decisions, some supply and engineering-based solutions to greenhouse emissions?"

It was a classic Barnett pitch, short on detail but big on vision.

Speaking at the same Society of Petroleum Engineers conference in Perth, Chevron Australia boss Roy Krzywosinski and Woodside boss Don Voelte also advocated policy changes to support gas developments.

Mr Krzywosinski provided some context for the debate by quoting expert predictions that the world will need 50 per cent more energy by 2030.

"To meet that demand, we're going to need all the energy we can develop, in every viable form," he told the conference.

Companies like Chevron and Woodside believe liquefied natural gas (LNG) can make a big contribution to meeting the world's energy needs, in a manner that also contributes to a better environmental outcome.

Chevron's proposed Gorgon LNG project, for instance, will result in 45 million tonnes per annum less greenhouse gases compared to the use of more carbon intensive fossil fuels, according to Mr Krzywosinski.

"To put this into context, the net reduction in greenhouse gas emissions is equivalent to taking about two thirds of all vehicles off Australian roads...or a reduction of over 8 per cent of Australia's total annual greenhouse gas emissions."

If all of the big LNG projects planned for Australia come to fruition, this would result in a net reduction of 120 to 200mt of greenhouse gases compared to the use of more carbon intensive fuels.

This is the equivalent of about three times Australia's current annual transport emissions.

What worries the big oil and gas companies is that Australia's proposed emissions trading scheme will impose costs that could make new projects unviable, in contrast to mature industries like coal mining that will effectively be subsidised so they are not fully hit by the new scheme.

"The way the ETS is currently proposed leaves the LNG industry bearing the full economic costs, and is essentially subsidising more carbon intensive industries," Mr Krzywosinski said.

"This will compromise the growth of the LNG industry and increase global warming.

"Just think about this for a minute. For every one tonne of carbon dioxide emitted in LNG production within Australia...you achieve a reduction of up to nine tonnes of carbon dioxide emissions from more carbon intensive alternatives in places like China.

"This fact cannot be overlooked against a backdrop of the world's greatest ever expectation - the insatiable global thirst for energy that is needed to sustain and drive our economies and way of life."

One option is to reduce the growth in energy demand. To the extent that an ETS adds to the cost of energy supply, it may have this effect, but policy makers are wary of imposing schemes that clearly lift consumer prices.

Coal miners, current and proposed, are putting a lot of focus on new technologies that they believe will make coal-fired power much cleaner and more efficient.

It will be a great outcome if this can be delivered, but there is a lot of research and development work to be done before we reach that goal.

In the interim, policy makers need to focus on the very tangible and realistic outcomes that the LNG industry can deliver, with or without a transcontinental pipeline.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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