Smithereens: Australia’s climate commitments blown if giant fossil fuel projects proceed

by Michael West | Jan 2, 2020 | Energy & Environment

As bushfires rage and the demands for action on climate rise, the gas cartel is developing a suite of enormous fossil fuel projects destined to blow Australia’s commitments to the Paris Agreement to smithereens. Michael West reports on the push to frack new provinces; the propaganda and the reality.

Adani is just the tip of the slag-heap. In 2020, the war between climate campaigners and the fossil fuel lobby is poised to escalate dramatically as a slew of large fossil fuel projects push towards approval and production.

Battles will rage over each one, battles between farmers and frackers, between activists and lobbyists, between renewables and old energy interests; battles all fuelled by the unfolding tragedies of this summer’s bushfires.

The combat is already underway, yet tensions will rise again in the battle for Narrabri, the battle for the rights to frack the Beetaloo Basin, and the battles for the Galilee and North Bowen basins.

Each project is a carbon bomb, says gas analyst Bruce Robertson. Together they threaten to blow Australia’s Paris climate commitments to smithereens.

“It is unprecedented”, he says. “This is the biggest tranche of fossil fuel projects I have seen in my lifetime”.

Robertson is a gas analyst with IEEFA and his track record in exposing the lies of the gas cartel and the direction of gas markets is peerless.

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The propaganda war has been relentless. In 2015, Bruce Robertson exposed AGL for claiming it needed to frack the Gloucester region on the mid-New South Wales coast because a “supply cliff” was looming. A “supply cliff” for a nation swimming in gas.

He later called out the gas cartel for stoking the scare campaign around supply and claiming NSW and Victoria would have to rely on “exports” from other states. In 2017, he predicted the failure of the LNG industry and the global gas glut.

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The fear campaign about gas supply persists to this day, despite Australia leapfrogging Qatar as the world’s number one gas exporter. It has reached a ludicrous stage where Australia is moving to import gas to make up for all the gas it is exporting.

Now, Robertson is saying “gas demand will be thumped by renewables. It has already happened in Australia”.

In other words, the suite of onshore gas projects not only don’t have to happen, they should not happen at all. They are uneconomic; they will only benefit the gas cartel and destroy the environment.

Coal demonised but gas is almost as bad

Before we get to the detail, some vital points, obvious to some but which elude many, including in the media.

Coal attracts most of the bad press on climate change but gas is a greater threat now to Australia’s emissions as these large onshore exploration projects come online. The gas industry has been crafty and even the fact that they call it “natural gas” is a significant factor in gas not being so demonised as coal.

Adani attracts a good deal of the media coverage as the villain on Australia’s climate stage but its Carmichael thermal coal project in the Galilee Basin is just a fraction of the broader picture. Adani is a stalking horse for other projects, for fossil fuel interests of Gina Rinehart and Clive Palmer in the Galilee Basin.

Behind the scenes, a Chinese and Singapore-backed pipeline monopoly, Jemena, is lobbying for government subsidies to build a pipeline from Mt Isa to Gladstone in Queensland. Should this occur, says Bruce Robertson, it will open up three new provinces to gas fracking: shale gas in the Northern Territory’s Beetaloo basin and new coal and coal seam gas (CSG) developments in the North Bowen and Galilee basins.

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Last year before the federal election, the Labor Party announced a $1.5 billion financing facility to develop coal seam gas (CSG) in the Galilee and Bowen basins in Queensland, and shale gas in the Beetaloo basin in the Northern Territory.

It is a bizarre paradox that one of the major beneficiaries of this government largesse is Jemena, a foreign multinational being audited by the Tax Office for tax evasion (as disclosed in the fine print of the latest financial statements of its corporate vehicle SGSP Australia Assets). Somehow, Jemena has also been able to gain exemptions from the national gas rules.

Pedal to the metal

Nonetheless, it is “pedal to the metal” from the gas lobby, says Robertson. “They are accelerating the development of fossil fuels at the moment at a pace I’ve never seen. The scale is mind-blowing.

“There’s the Burrup Hub development on the North West Shelf, the whole Galilee Basin complex – not just Adani but Gina (Rinehart) and Clive (Palmer) too – shale gas fracking in the Beetaloo and more coal and CSG in the North Bowen and Galilee.”

Will the Government pick up Labor’s commitment to subsidise the new gas developments? Probably, says Robertson.

Famously, Labor lost the election and the Coalition is yet to reveal its position on subsidising Jemena and opening up the new gas provinces but, if the party’s predilection for fossil fuel donations – and kowtowing to industry lobbyists – is any guide, it may be just a matter of time.

Yet it makes no sense either financially or environmentally. “Gas demand will be thumped by renewables. It has already happened in Australia,” says Robertson. Moreover, shale gas has been a disaster in the US, the gas glut globally has ravaged prices, and onshore gas is expensive”.

Bruce Robertson’s arguments against subsidising the suit of new gas projects were outlined in a paper on fracking the Northern Territory delivered just before Christmas.

A corporate disaster

Key points from the presentation:

  • ConocoPhillips announced a 10-year plan to buy back $US30 billion of shares, equivalent to about half of its current market capitalisation.
  • The oil producer has doubled down on its commitment to returning cash to investors while attempting to distance itself from the troubled US shale gas sector.
  • Another oil major, Equinor, departed the US shale sector reporting massive losses Equinor.
  • The Norwegian state producer unveiled total write-downs related to shale investments of $US9 billion -$US10 billion.

“The shale fracking industry in the US has been built on cheap debt and abundant credit supply,” wrote the analyst. “But debt to the sector is no longer cheap, bankers are tightening credit and a wave of bankruptcies will ensue”.

Locally, prior to 2015, the east coast of Australia had a stable domestic market for gas with reasonable prices of $3-4/GJ. Yet, with the advent of the construction of the six LNG trains at Gladstone domestic gas prices increased rapidly to peak at $21/GJ in early 2017. Prices have now come down and stand at between 8-12/GJ according to the Australian Competition and Consumer Commission (ACCC).

The Gladstone plants have never operated at capacity. There has been “massive underutilisation due to failed economics”.

Gas industry myths

The gas lobby has long argued that Australia needs to open up new onshore gas fields to create more supply (the huge supply is being soaked up by LNG exports). Robertson dismisses this as a myth.

“Gas production from the Southern States of NSW, Victoria, SA and Tasmania is actually above the levels needed to supply these domestic markets. Currently Australian Energy Market Operator (AEMO) figures show the southern states produced 433PJ of gas in 2018 while they consumed 431PJ.

“The situation becomes more comfortable out to 2022. Gas production is forecast to increase by 5% to 456PJ in 2022 while demand is falling”.

“Coal seam gas is high-cost gas. In Australia the mid point of the cost of production of the vast bulk of conventional gas is $3.43 while unconventional gas is $5.03”.

This is before the costs of salt/brine disposal – for which there is no viable solution as yet – are taken into account. “The CSG to LNG industry got its costs horribly wrong both in terms of the costs of the plants and the cost of the CSG. It is now trying to socialise those losses onto the Australian public.

“The latest ruse is to reserve new (read high-cost) gas fields for domestic use while they export the cheaper conventional sources of gas.”

Costs and benefits

While the industry promised much in the way of taxes and royalties, tax revenue has been minimal. “Far from the $1 billion in tax that BG chief (now EnergyAustralia boss) Catherine Tanna said her company would pay, in 2016-17 BG still paid no tax. BG has been taken over by Shell and it too paid no tax in 2016-17.

“The other two consortia that own plants at Gladstone are led by Santos and Origin, neither of which paid tax in 2016-17 according to the ATO,” says Robertson. “There simply has not been the billions of dollars for the Queensland economy that were promised”.

According to a Bloomberg New Energy Finance report, two-thirds of the world’s population live in countries where wind or solar (or both) are the cheapest source of new power generation. By 2030, new wind and solar will be cheaper than running existing coal or gas-fired plants virtually everywhere. In China, Bloomberg expects this tipping point to be reached as soon as 2027.

In light of the plunging costs of renewables, falling demand for gas and the outlook for gas prices, the impending suite of giant new gas developments in Australia is shaping on the horizon as a herd of very large white elephants.

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Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.

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