It’s a trick question because Shell is already a major gas blood-sucker on the east coast, sitting on giant Arrow reserves that are not being developed. But it may get a lot worse:
Shell has written off $390 million worth of newly acquired coal-seam and other gas exploration and evaluation ground associated with the Queensland Curtis LNG plant at Gladstone because of poor drilling and testing results.
Raising more questions over long-term production from Queensland coal-seam gas fields that are supposed to feed Gladstone’s three gas-hungry LNG plants for the next 20 years, the writedowns were revealed as part of $1.2 billion of impairments logged this month in local accounts for Shell’s Queensland subsidiaries.
…It is understood the ground that has been written off is in the Surat, the Bowen Basin, where Shell’s Arrow joint venture with PetroChina has struggled to produce as much gas as was hoped, and the Cooper Basin, where BG had once been looking for shale gas with DrillSearch (now taken over by Beach Energy).
Consultants EnergyQuest have warned onshore reserves slated to supply Gladstone may not yield as much gas as companies expect, after analysing the results of 8000 wells.
“The new Gladstone coal-seam gas to LNG industry is fed by booked proven and probable reserves, but substantial reserves are booked in areas that have not yet demonstrated any commercial production,” said EnergyQuest chief executive Graeme Bethune. “In short, the east coast gas market is exposed to significant elevated reserves risk.”
Cripes.
We can take some comfort from the fact that gas is effectively carbon taxing itself out of existence, via Reneweconomy:
The New South Wales pricing regulator has decided that the range of recommended solar feed in tariffs for the state’s 350,000 solar households should double from July 1, following the sharp jump in wholesale electricity prices.
IPART, the Independent Pricing and Regulatory Tribunal, has recommended that the benchmark price paid for solar power exported back into the grid should jump from a range of 5.5c/kWh to 7.2c/kWh to 11.6c/kWh to 14.6c/kWh.
Unlike in other states, the FiT is not compulsory, and some retailers, such as Enova and Origin Energy, have been offering tariffs of up to 12c/kWh.
The new pricing range was calculated on the forecast wholesale electricity price for NSW, with a “solar premium” also added for the fact that solar produces during the day, when prices are normally higher.
However, IPART has not followed its Victorian counterpart in including, or attempting to include, a social or environmental or climate benefit from solar, suggesting it would be difficult for retailer to recoup the cost, and it did not want to create a subsidy.
The recommended tariff for Victorian solar households were told in February that their solar feed in tariffs would more than double from July 1 from 5c/kWh to 11.3c/kWh, thanks to a jump in wholesale prices, and the inclusion of a “carbon cost”, although some criticised the rate for not reflecting the true rate of wholesale price increases.
The NSW move will be good news for solar households, most of whom have lost their premium solar tariffs of 60c/kWh for all solar power generated. That ended on January 1, although most customers should have been able to secure a higher tariff than the minimum 5c/kWh if they shopped around.
Solar PV could provide 30 per cent of Australia’s electricity needs by 2030, according to the Australian Renewable Energy Agency, which has made further improvements and innovation in solar power one of its main investment priorities for the next few years.
Storage and grid reliability and stability will be the main priorities, however, and could absorb up to half of the $800 million the agency has left in its budget. Much of this is expected to be committed – if not spent – in the next three years.
“We think we can have most impact in these four areas. This is where we are concentrating our efforts,” ARENA CEO Ivor Frischknecht said at the function at Melbourne’s Hub, an innovation centre in Bourke Street.
Frischknecht said Australia was on the path to an “affordable and reliable” renewable energy grid, thoughts echoed by the new CEO of the Australian Energy Market Operator, Audrey Zibelman, who repeated her assessment that Australia was at the forefront of the global energy transition.
“The future of energy industry going to look a lot like other industries that have been transformed,” Zibelman said. “It will need to be flexible and adaptable. It is not going to happen in decades, it is going to happen in a matter of years …. and maybe even shorter for some technologies.
“This is the best time ever to be in this industry. It’s the most exciting time. If you look at the changes from 1980-2005 and compare to what has happened since, it is just breathtaking. And it is getting faster.”
The pace of the change was underlined last week by the latest report by the CSIRO and the network owners, Energy Networks Australia, who said that households would be at the centre of a 100 per cent renewable energy grid that could be built within Australia before 2050, and deliver huge savings to consumers.
Zibelman agrees that consumers will be the focus of the new energy system. “We need to think about the power system differently. We need to think about developing the 21st Century grid from the customer out, rather than customer in.”
Cold comfort for Australia’s gas-dependent manufacturers.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
