Extracting reason in the shale debate

Shale gas production is already turning the US energy industry on its head and if Australian gas prices follow those of America, Australia may find it harder to turn its back on the resources under its feet

The new claim of large shale gas deposits in the North Sea raises some really major issues about 21st century energy supply and greenhouse gas abatement.

Britain, which enjoyed a halcyon period as an oil producer two decades ago but fell in to an energy strategy pit under the Blair and Brown regimes, may have enough offshore shale gas to send it in to the top ranks of global producers, it is being claimed – while Schlumberger, a world leader in energy services, says there are large shale gas and oil reserves on the German, Dutch and Danish North Sea coasts as well as in the Baltic.

Taken with the North American, Chinese, Argentinian and Australian shale resources, to name only some, this could be a global game-changer in the same way that coal seam gas overturned conventional energy wisdom here a decade ago.

The situation highlights one of the most famous petroleum industry mantras – that oil is found in the minds of men (and women).

It is not news to scientists that shale rock holds hydrocarbons, but only in recent years has the technology for extraction, often as deep as 7,000 metres, become accepted as commercially viable and turned these geological curiosities in to big money prospects. (America alone saw $US66 billion in shale gas deals last year.)

In Australia, shale gas opportunities in South Australia’s Cooper Basin, Queensland’s Maryborough Basin and the Perth and Canning basins in the West are of particular interest – and not just for domestic consumption.

The importance of our energy relationship with Japan and South Korea, neither of which have hydrocarbon reserves of their own, is constantly underplayed in this country

Shale gas production is already turning the US energy industry on its head and the ripples just keep spreading – American coal companies, for example, are looking increasingly to the global market for income.

The local petroleum managers, analysts and government advisers will get an opportunity for a close-up look at the international scene when the Australian Petroleum Production & Exploration Association conference is held in Adelaide next month – two of the keynote speakers will be Maria van den Hoeven, the International Energy Agency executive director, and Christophe de Margerie, the chairman of Total.

Both can expect a full-scale interrogation from the media – APPEA conferences attract a pack of 40 to 50 energy reporters over four days, the largest attendance outside the political arena and one of the best-informed sub-sets of Australian journalism.

While most of the Australian gas focus is still on LNG – from conventional sources offshore and coal seam methane in Queensland – attention internationally is turning increasingly to shale and to the acrimonious debate between gas producers and the environmental movement.

Reading the overseas media, it seems to me that the debate is starting to shift towards the perception that "we cannot give up this opportunity” while the desperation of the environmentalists to sell an argument that shale gas use suppresses the role of renewables and is an inadequate bridge to a low-carbon future is starting to wear thin even if our own ABC and the Fairfax broadsheets in particular are still fiercely in the greenie/NIMBY farmer camp on this one with coal seam gas.

The green fears are not irrational.

If Australia followed America and gas prices here plunged rather than rose, as is often predicted, onshore wind would struggle to compete and more marginal sources, like geothermal, solar or wave power, could be in strife.

Which leaves the environmental movement having to play the climate change card all the harder.

The argument, as put by one American green commentator, is: "If we really want to cool the planet this century, we need rapid and massive deployment of a mix of conservation, wind, solar and nuclear energy – not natural gas.” All but one bit of this is the Green's case here.

China, of course, is working towards an energy strategy where shale gas and greater use of renewables co-exist along with burgeoning nuclear generation, a huge coal-fired power industry and a hydro-electric capacity that is almost five times Australia’s own total mix.

Our own dear greens like to hold up Chinese developments in the solar and wind sectors at every opportunity, but they are not especially given to acknowledging the even bigger commitments to hydro and nuclear forms of zero-emissions power.

Further down the track – and how far is a large question – the US has a number of companies, including the giant Shell Group, looking hard at using shale gas as a feedstock for transport fuel and for chemicals manufacture.

Gas can be converted into excellent diesel fuel and the local lack of interest could change with the political wind.

The strategic implications of shale developments, not only in the States but in India, Malaysia, the Philippines, Thailand, China and Australia, to name just some of the Asian region countries with fingers in the pie, are "non-trivial,” as one of my favourite economists is wont to say.

An energy-rich world where resources are widely distributed and relatively low-cost is a long way from the line the doomsayers have been selling us for the past 20 years.

No matter how green Britain and western Europe want to be, one commentator points out it would be impossible for the EU to "turn its back on resources under its feet.”

And this applies to more than the Europeans.

Keith Orchison, director of consultancy Coolibah Pty Ltd and editor of Powering Australia yearbook, was chief executive of two national energy associations from 1980 to 2003. He was made a Member of the Order of Australia for services to the energy industry in 2004.


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