Gas supplies are a big fracking deal

Cries of a gas shortage from Australian chief executives should be heeded – the 'anti-fracking' lobby poses a real threat to essential industries.

The hostage crisis in Algeria that came to a bloody end on the weekend is a disaster for a country that relies so heavily on gas exports to pay for its food.

Ninety-eight per cent of its export revenue comes from gas, but Algeria was already struggling to attract new investment because of rising costs, and security requirements will now increase costs even more.

Australia needs to be very careful something similar doesn’t happen here, for entirely different reasons.

Gas producers and users are now openly squabbling over the availability and cost of gas in Australia. On Monday the chief executive of Brickworks, Lindsay Partridge, said Australia was facing a gas shortage that would nobble manufacturing; yesterday there were howls of "rubbish” from the gas industry.

This morning the chief executive of the Australian Petroleum Production & Exploration Association, David Byers, responded that the problem is a lack of gas caused by over-regulation. There’s plenty of gas, he says – 819 trillion cubic feet of reserves against 1.8 TCF in total domestic and export consumption – the problem is developing it.

What he didn’t talk about was fracking, but he should have. Accessing oil and gas in tight coal and shale formations by hydraulically fracturing the seams has led to a massive increase in energy supply in the United States.

Oil production in the US has increased from 6 to 7 million barrels a day in the past few months and the gas boom is leading to the rejuvenation of its manufacturing industry. More than 10,000 wells per year are being fractured.

In Australia, protests against fracking are stalling the industry, especially in New South Wales, where there are plenty of reserves close to key domestic markets. As David Byers notes, New South Wales imports 95 per cent of its gas, and the industry was placed in a holding pattern for 18 months as the government re-regulated it.

The argument over fracking is one of the most significant issues facing Australian governments.

Those protesting against it have passionately held fears about its effect on the environment and are clearly just getting warmed up in their efforts to stop it, especially in the Sydney Basin.

But the consequences of their success are far greater than those of the great logging protests in Tasmania. Woodchips were not in short supply domestically and paper was not an essential product.

Gas definitely is an essential product, and the concerns of Australian users of the stuff, like Lindsay Partridge, that they are going to run out of it, need to be taken seriously.

There is no place, however, for a reservation policy to force producers to allocate a portion of their output for the Australian market.

What’s needed is less regulation, not more. Specifically, Australia needs to join the world trend towards opening up tight reserves in coal and shale by the amazing technique of hydraulic fracking.

This country should have a glut of energy, not a looming shortage.

Follow @AlanKohler on Twitter

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