The FUTURE of gas

With energy prices rising across Australia, on and offshore gas developers are heralding their projects as a solution for businesses and ordinary consumers.

Spruiking jobs, taxes, and lower gas prices, they're expanding rapidly. 

Western Australia's North West Shelf and the onshore assets through Queensland and New South Wales are the hotspots, but with the advent of onshore gas there's exploration almost everywhere.

But compared to the offshore rigs in WA, coal seam gas and shale gas has had a hard time winning approval from both governments and communities.

While developers acknowledge the issues they're adamant they're only short term hurdles.

But many in the community, and in politics, aren't so sure.

The call for a moratorium on coal seam gas along the east coast has grown stronger as the months progressed, with protests locking down exploration projects every other week.

Nevertheless the industry and most state governments remain bullish, albeit cautious, about expanding natural gas projects across Australia.

Industry advocates claim it's their pragmatism that's driving the expansion, filling a shortfall in energy supply that can't be made up any other way.

But in the era of man-made climate change, protestors are wondering whether we can't fill the gap with clean energy instead, whilst avoiding the health and environmental risks posed by the gas industry.

This month Australian Mining got the lowdown from some of the industry's biggest figures on the future of this burgeoning industry, including Santos CEO David Knox, Shell's Ann Pickard, and Commonwealth Department of Resources and Energy secretary Drew Clarke.

Stay in control

One of the strongest themes emerging from the Shell, Santos, and Commonwealth leaders at the GE at Work Conference was the need for strict regulation of the industry.

Pickard, who Fortune Magazine previously titled 'the bravest woman in oil,' told the panel strict rules needed to govern gas projects to ensure weak operators didn't tarnish the industry.

"We need a very good and strong regulator, it doesn't matter whether it's unconventional gas or offshore," she said.

"Because if a company misperforms, like with what happened in the Gulf of Mexico some time ago, nobody remembers which company did it, they're just going to know it was the oil industry, so we're all tarred by the same brush."

Whilst marking the cost of heavy regulation a concern, Pickard said most developers were happy to accept it if it meant creating a stable business environment.

The commitment to regulation should come as welcome news to concerned community members along the east coast of Australia, but many still claim the rules don't go far enough.

Most recently the Victorian Government enacted a ban on fracking until better regulation was drawn up, joining NSW in keeping a close watch on the coal seam gas industry.

Whilst a token gesture unlikely to have any impact on developers, the Australian Petroleum Production and Exploration Alliance has still voiced opposition to the ruling.

Long arguing the gas industry is one of the heaviest regulated sectors in Australia, the APPEA has urged state governments to look toward QLD as a model regulator.

QLD has long housed coal seam gas production wells and has the most advanced industry in Austra­lia, which the industry says has an impressive health and environmental record.

But unsurprisingly many protest­ors claim otherwise, and claim they can point to many QLD examples where land and health is already starting to erode as the gas industry expands.

To try and settle the matter once and for all the APPEA is helping draft national best practice guidelines which it says will help clear up confusion and fear about the current state-based approach, which has caused headaches for companies and stakeholders with its varied and at times opaque approach.

National approach

Helping maintain the energy picture from the national level, Clarke was able to provide important insight into how this new national framework would be played out.

And his approach was decidedly pro-business.

"The best policy is to let the market make the investment decisions," he told the panel.

"There are inevitable and proper roles for government in this area, but the primary policy setting we aspire to is to keep those at the appropriate level and let the market make the choice of where to invest and what to build and what to do with their gas."

Clarke said the Government had aimed to encourage gas development because if projects were not supported their investment, jobs, and economic benefit would go elsewhere.

It was a sentiment echoed by both Knox and Pickard, who said rising costs downunder meant Australia was already struggling to compete with provinces like East Africa and North America. 

Risk factor

Outside the cost of doing business, both Shell and Santos said community consultation, and keeping the licence to operate, was one of the biggest concerns for gas developers in Australia.

Knox said keeping the community informed was particularly important with onshore gas because of its proximity to built-up areas.

"We've got to tell our story, because when I and a lot of other gas professionals were brought up, we basically worked on platforms offshore, out of sight out of mind."

"What's happening with shale gas in the United States and what's happening here in Australia is we're coming on people's farms and people's backyards."

Knox said this consultation revolved around convincing the community the industry knew what it was doing.

"We've got to do a tremendously good job in explaining what we do, why we believe we can do it safely, and why we can be responsible.

"I think that's one of our biggest challenges, not just in Australia, but worldwide."

Pickard also said Shell was taking its time and talking to the community before expanding with its QLD developments.

"We need to take our time and make sure our stakeholders, farmers, and people out there understand what we're trying to do and that we can coexist."

But she was confident the consultation would not be a major roadblock for the company.

"Everybody's saying we're slowing down. We're not slowing down we just want to make sure we get the stakeholder side right," she said.

But despite the commitment of both companies, many landholders say they can speak from firsthand experience about the lack of consultation before development.

One owner told Australian Mining companies were guilty of "misrepresenting information, inadequate notification, and refusal to acknowledge valid concerns".

They also said such complaints could be heard from most onshore gas regions in NSW, and that ­companies had a long way to go before they gained the trust of the community.

What's next

Despite rising opposition to the onshore gas industry it's showing no sign of slowing down.

The senior management from all companies are determined to keep things moving, and while some state governments are more allowing than others, no major government is yet to voice opposition to the sector's advance.

While there's no doubt some politicians are urging for more restrained growth, the industry as a whole faces little opposition.

Nevertheless community backlash remains a significant wildcard and there's no doubt protestors have had significant success at slowing developments, particularly in NSW.

How long this opposition will last, and how high the stakes will rise remains to be seen.

But if the industry's current performance is anything to measure the future against, gas will have a bright future in Australia.

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