Rich shale gas supply comes at a high price

Shale gas will not be cheap gas. Professor Peter Cook

Australia's onshore gas resources could be more than double the size of current estimates, but it won't be cheap to extract and it won't be a quick solution to the country's looming domestic gas shortage.

A report commissioned by the federal government's top research council found domestic shale gas resources could exceed 1000 trillion cubic feet; dramatically more than the 396 trillion cubic feet that is known to exist in explored parts of the nation.

But despite the bullish supply forecasts, the report found Australia was unlikely to enjoy the sort of cheap energy boom that shale has created in the US over recent years, with Australian shale likely to be high cost.

"Shale gas will not be cheap gas," said Professor Peter Cook, chair of the expert working group that compiled the report. "We have large resources but few economic reserves at this stage."

The findings will disappoint major gas users and consumers facing big increases in gas prices over coming years as domestic prices align with higher international prices.

The findings are also at odds with recent comments by Resources Minister Gary Gray, who told an audience in Adelaide last month that development of shale "will drive once again prosperity through a manufacturing sector and it will drive prosperity through downward pressure on domestic gas prices".

The researchers said shale gas will not be produced at scale by 2015, when gas prices will start to rise on the back of increasing exports. "It's something for the future, a little bit beyond that time," Professor Cook said.

Other hurdles include the lack of available pipelines, which mean shale gas will cost about $6-$9 per gigajoule to produce, compared with less than $4 in the US.

Costs aside, the report said shale gas developers will need to work hard to secure community support, given they will use similar "fracking" techniques to those used controversially on farmland in Queensland.

While only about 10 per cent of coal seam gas wells require fracking to release the gas, the majority of shale gas wells will require such processes, as the resource is typically buried much deeper and in much less permeable rock.

By using a high-pressure mixture of water, sand and chemicals to crack open shale rock, fracking has the potential to contaminate groundwater and also use up scarce groundwater supplies in remote parts of Australia.

"Because the volumes of water for shale fracking are relatively large, we are in areas where most of the water will have to come from groundwater systems, which are relatively limited," said John Williams, a founding member of the Wentworth Group of Concerned Scientists.

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