Australian gas shortages- Govt the problem not the solution

Petroleum drilling rig

With gas supplies rapidly running out, the Sth Australian govt decides to build a gas powered station to address failing electricity supply. The power supply is failing because of the State Premiere’s insane obsession with renewables, and the mad myth of global warming.

Now he’s going to fix the problem with gas, when anti-fossil fuel govts have for years done so much to put gas explorers and producers out of business.

People need to understand why there’s a shortage of gas. Here’s an abbreviated explanation.

There are two prime sources of gas, and it is important to appreciate that both have entirely different methods of exploration and extraction, and also an entirely different set of risk factors. You cannot conflate these different risk factors into one industry.

  1. Coal seam gas, or methane, (sometimes called unconventional) is accessed by means of shallow wells (average about 500 metres) intercepting coal seams. There needs to be a network of wells over a relatively small area to make the extraction economically feasible.
  2. Petroleum Gas (or conventional gas) is accessed by deep drilling into hydrocarbon reservoirs thousands of metres below the surface. It does not require a network of wells. If more wells are needed, they are generally drilled by “kicking off” from the first well. About 95% of Australia’s production is petroleum gas.

These two sources of gas have widely differing means of discovery and extraction. Methane gas is low pressure. It has leaked into the atmosphere by natural means (swamps, exposed coal deposits and underground caverns) for centuries. It still leaks to the surface today by those means.

Petroleum Gas very rarely escapes naturally due to its depth. It needs to be confined, or in an underground geological trap, under pressure, to be utilised.

Methane gas wells sometimes leak to surface, but as with natural emissions, there is no danger to these leaks apart from the extremely remote risk of a low intensity fire or flame. The leaks can be repaired relatively easily by resealing the wells. It is important to understand that the danger from these wells, even if they leak, is so minimal as to be almost non-existent.

Do methane gas wells effect water supplies? Extraction frequently requires the removal of large quantities of water. Removal of groundwater lowers the pressure on the gas and allows it to seep through the coal and into the wells. This water is contaminated by coal and not drinkable.  Does its extraction affect local water wells. It shouldn’t but if either the water wells or the gas wells are constructed incorrectly, it may.

Govt agencies regulate the construction of coal seam gas wells and water wells. These regulations are designed to geologically isolate one type of well from the other, and if they are followed, there should be no connection between the two, and therefore no problem.

The bottom line is that there is no good rational reason to ban methane gas drilling for “safety” reasons.

Disputes with landowners concerning land use and access are a matter for the gas companies and farmers and should be negotiated until an agreement satisfying both parties is reached.

State governments reacting to campaigns by anti-capitalist groups have banned or severely limited methane gas extraction in New South Wales, Victoria and Northern Territory, with baseless scare campaigns against fracking being the main driver of these bans. Exploration is under severe pressure in other states.

Coal seam gas drilling rig

Baseless fears around fracking are also used to ban petroleum gas drilling. It doesn’t blow out unless of rare catastrophic events, and no water wells are contaminated because the gas is much much deeper than the aquifers that contain the groundwater. Victoria has inexplicably banned methane gas exploration and petroleum gas exploration.

Consequent to the unfriendly actions of governments captured by environmental scaremongerers, gas exploration has dwindled to almost zero. Its just too hard, and too risky an investment.

Gas company Metgasco accepted a $25 million compensation package to cease methane gas exploration in NSW. Lakes Oil was stopped by the State govt from exercising its petroleum exploration options in Victoria. It is now pursuing a$2.7 billion claim in the courts.

In view of the above scenarios it is laughable that Malcom Turnbull now threatens government intervention to deal with a shortage of gas in Australian markets.

The gas market too is distorted by taxation and international regulations to an extent that is far too complex to explain here.

Government is not the solution to gas shortages it is the problem. Malcolm Turnbull with his empty threats to current gas suppliers achieves nothing but to make himself look like a blustering fool. As usual.

Here is the bottom line. Both methane gas and petroleum gas wells are drilled by the thousands in the US and bring employment and wealth to the regions where the drilling takes place. The US produces about 2 trillion cubic ft of methane gas per annum. There are around 2 million producing wells. (conventional and methane)  There is around 90 billion cubic feet of petroleum gas produced per day! The downside is negligible.

There is no shortage of gas in the United States, so why is there one in Australia? Govt intervention is the primary answer.

Shortages of gas and price inequities are first of all addressed by removing unnecessary regulations that prevent or hinder drilling and exploration. Once this has taken place, then the problems of pricing can be addressed.



Categories: Australian Politics, Economics

Tags: , ,

3 replies

  1. Good article setting out the truth about gas shortages in Australia. It is unfortunate the word ‘fracking’ is too close to the word ‘fu..ing ‘ and can be easily exploited by anti-capitalist and green groups to convince non informed people that ‘fracking’ is real bad. Even I, understanding what it means, hate that word fracking. Honestly, it sounds awful, like something nasty you’d like to do to someone who is not your friend.

    Limiting exports seems the only way the Turnbull government can guarantee gas supplies for local consumers, at least in the short term. Even though there will be contracts the gas exporters will claim force them to export all their production, governments can and often do overrule such agreements. In business this is known as ‘sovereign risk’ and most producers have escape clauses in their contracts covering sovereign risk in the same way as they can ‘claim force majeure’ when acts of God occur which prevent them from keeping the agreement.

    Of course sovereign risk is generally associated with unstable African and Third World Nations and not First World Nations like Australia and the USA, but times are changing. I believe Trump will soon enact policies in America which may create sovereign risk for multinational corporations, and this may also happen in Australia. Corporate boards are aware of this and no doubt preparing themselves for the changing scenarios.

    Australia should not be afraid to offend them in order to protect our National interests. Trump will set the example we should follow.

    Like

    • Excellent comment.

      Re fracking, (an American oilfield short for fracturing), when protesters make a case against it, they always conflate deep fracking for petroleum gas, and shallow fracking for methane gas.

      Although the principle is the same the two processes are quite different technically. A completely different set of risks and outcomes.

      When watermelons complain of fracking, its always a good policy to ask them

      “are you talking about fracking for petroleum gas or coal bed methane?”

      Usually this causes a gulp and then a blank stare.

      They wouldn’t have a clue.

      Like

  2. What a ridiculously idiotic situation Australia’s energy security is now in!
    It’s interesting and at same time, very maddening how the whole debate is hijacked by either choice of fossil fuels or renewables.
    NO mention of nuclear power option which is now about 70 yrs of technical advancement and over 450 + reactors already in use around the world to prove this. Google it, easy to find that info.

    Fusion reactors are in prototype stage atm too. Which increases efficiency 10 fold over older Fission based reactors.

    Yet, South Australia has some of the world’s richest sources of Uranium aka “yellow cake” but plays the lefty card and puts more government into how energy market is run, that & Federal government now fiddling with market forces in this sector.

    Out of top 25 economic powers in the world, of which Australia is a member, it is the only country that does not have nuclear power for electricity generation… WHAT A JOKE!

    Like

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