01/04/2009 - 22:00

Plentiful gas reserves a natural choice

01/04/2009 - 22:00

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The natural gas industry is a good news story with a way still to run.

Plentiful gas reserves a natural choice

A VERY reliable barometer of public sentiment, who happens to be my mother, reckons that we under-estimate the desire by the public for good news stories. She's not referring to stories of amazing rescues or movie star marriages. She's talking about stories that give us confidence that humanity is making headway on some of the big challenges that we confront.

In these challenging times, Australia's natural gas industry is good news.

Natural gas has been heating our homes and generating our electricity for over half a century.

But the need for urgent greenhouse action, concerns over domestic and regional energy security, and our region's growing appetite for energy have brought into stark relief the strategic value of Australia's natural gas resources.

The world's demand for energy is increasing largely as a consequence of population growth and developing countries determination to attain the standard of living that most of us take for granted.

The growth of global population means that, by 2030, 40 per cent more energy will be needed.

Most of this increase will take place in our neighbourhood. China and India will account for half of that growth and developing countries in total will account for 87 per cent.

Australia is well positioned to meet a substantial portion of that demand.

The fact that demand is temporarily curtailed by the global economic downturn should not be mistaken for anything other than what it is - a pause.

In Australia our need for secure and reliable energy is also increasing. More people mean more businesses and more services resulting in an increase in electricity demand.

The Australian Energy Market Commission, one of the industry watchdogs, sees "business as usual" requiring 28 per cent more electric power by 2020 and, by 2050, eastern Australia will require more than double its current power production.

The magnitude of the challenge in meeting energy demand both here and overseas is exacerbated and complicated by the need to reduce our global greenhouse gas emissions.

Australia is blessed with an abundance of energy resources - natural gas, coal, uranium, solar, wind, geothermal - we can draw on them all.

For a range of technological, practical, affordability and public acceptability reasons, clean coal, nuclear, solar, wind and geothermal energy are unlikely to be providing competitively priced base load heating and power in significant quantities any time soon.

We must pursue with vigour all prospective options for meeting our future clean energy needs. Equally we must be realistic about their prospects in the short to medium term.

Right now, natural gas represents a compelling opportunity to address climate change, provide energy security to both Australia and key Asian economies and in doing so, strong economic growth for Australia.

About 60 per cent of the natural gas that we produce today is used domestically - piped around the country to service households, businesses and, of course, for electricity generation. The other 40 per cent is exported in the form of liquefied natural gas or LNG - gas that is refrigerated to minus 161 degrees so that it may be transported long distances.

Depending on the technology used, natural gas emits between 50 and 70 per cent less carbon dioxide than is produced by an existing conventional coal-fired power station

Put another way, gas-fired power generation can reliably and affordably deliver 80 per cent of the carbon emission reductions that would be achieved by retro-fitting an existing coal-fired power plant with carbon capture and storage technology - an option not available in the foreseeable future.

To go a step further, if energy demand to 2050 was to be met - as coal-fired power generation retires - by a combination of 20 per cent renewable energy (as per the MRET target) and natural gas, carbon emissions would drop by around 20 per cent even while doubling the level of output. This equates to a saving of nearly 1.5 billion tonnes of carbon dioxide emissions compared with maintaining the current level of coal-fired power generation.

It also represents an achievement of doubling electricity production while contributing almost 10 per cent of the 60 per cent reduction in greenhouse gas emissions that the government is seeking to achieve by 2050.

Gas-fired power generation uses very little water. It has a very small environmental footprint, low impact and low visibility infrastructure requirements.

It is the perfect complementary partner for intermittent renewable energy sources.

Modelling done by South Australia's Electricity Supply Planning Council notes that every 5,000 megawatts of wind power generation requires around 2,100MW of gas-fired power generation to ensure that a reliable supply of electricity is available to the grid.

The case for export gas, or LNG, is equally compelling. For every tonne of greenhouse gas associated with the production of LNG in Australia, between 4.5t and 9t are avoided in the Asia-Pacific region when this gas is substituted for coal in generating electricity.

When we consider that 78 per cent of China's electricity and 69 per cent of India's is generated from coal, we can begin to appreciate the huge potential that Australia's LNG export industry can make in reducing global emissions.

I'm often asked whether Australia has enough gas to meet these demands while ensuring we have enough gas for our own use.

The answer is unequivocally yes.

Australia consumes about 1 trillion cubic feet of gas (Tcf) per year. We export almost as much as that again.

To put that in perspective, all up Australia currently produces enough gas in a year to keep Perth going for 40 years.

Where is it and how much do we have? Off the north-west coast of Western Australia, we have more than 130 Tcf.

Over in the east, there is a further 10 Tcf offshore Victoria, and the same amount in the Cooper Basin. In the coal seam gas fields of Queensland and NSW, CSIRO estimates there could be as much as 250 Tcf of coal seam gas.

If we add that up, we are talking about more than 400 Tcf of natural gas, more than 250 years worth at current rates of production.

Government and industry geologists are very optimistic that further exploration will add substantially to this reserve base.

We are one of the very few countries that is finding substantially more than it is producing.

Despite these massive resources, Australia still only has two LNG projects - the North West Shelf operated by Woodside, and Darwin LNG operated by ConocoPhillips.

Currently, only 9 per cent of Australia's power is generated by natural gas, with NSW and Victoria under 2 per cent. The OECD and major economies such as the UK and the US have far higher penetration, at 23 per cent, 36 per cent and 20 per cent respectively.

We clearly have a way to go.

We do, however, have $200 billion worth of gas projects on the drawing boards.

The challenge is to shift these projects off the drawing boards and into construction.

Add to those projects the potential for domestic natural gas projects and we have a game-changing shift in Australia's resource sector.

n This is an edited version of an address to the National Press Club, Canberra, by Belinda Robinson, chief executive of the Australian Petroleum Production and Exploration Association.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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