Energy scarcity equates to higher costs of living and lower quality of life. This fundamental equation is being proven in real-time as Russian coal, oil, and gas is deemed persona non grata across the West. Following years of constrained development due to anti-fossil fuel activists, the cost of filling that gap is rising everywhere.

The lobbyists behind the anti-fossil fuel agenda are demanding a domestic gas reserve on Queensland’s LNG industry, claiming it will reduce the cost of electricity. The irony of lobbying to increase domestic gas availability, while clamouring for the end of fossil fuels altogether, is obvious to everybody outside the opaque green bubble these activists call home. A gas reserve must result in increased consumption; logic dictates that climate and renewables activists should oppose a domestic gas reserve.

In 2021, Russian pipelines supplied Europe with 200 bcm of natural gas. By comparison Australian LNG exports totalled 108 bcm. While Australia tops a ‘world’s largest exporter’ list, this applies only to LNG. Gas delivered by pipeline is a separate list – topped by Russia, with second place to Norway, then USA and Canada.

Source: statista

To say the Russian energy gap is significant is quite the understatement; and the obvious effect of restricting supply is higher prices. How does this affect Australian consumers? Annual average gas prices in Australia’s five eastern gas clearing hubs is sitting well above $20/GJ — a massive increase from $7/GJ in 2021. Higher gas prices flow through to wholesale electricity prices.

Increasingly, gas-fired generators are filling the wind and solar supply gaps, despite an overall decline in gas-fired generation output due to higher fuel costs. Gas is only partly to blame though, with generator outages and flooded coal mines also increasing energy scarcity.

Source: AER wholesale statistics

The Western Australian domestic gas reserve is lauded, but this cost on producers is built into every gas project from inception. Production targets, facilities, pipelines, and export contracts factor in the reserve, before any contracts are signed and facilities built. Having a reserve in place before development begins actually increases the overall gas supply. Curtailing Queensland’s exports will have the opposite effect.

But is limiting exports an effective long-term solution? Frank Calabria, Origin Energy CEO, recently claimed that gas for ‘days and weeks’ would replace the output of New South Wales’ giant 2,800 MW Eraring coal-fired power station. The scale of retiring coal power means it can never be replaced with gas power fed from a domestic reserve.

Curtailing exports aims to lower domestic gas prices by redirecting export gas to local consumers. While gas-fired generators could generate cheaper power with a reserve in place, the increased demand would quickly see low-cost gas disappear. Soon enough, prices go up and we are back to where we started, with the activists again chasing arbitrary targets.

Gas exported from Queensland’s Curtis Island LNG facilities is partly sourced from an interconnected pipeline system linking Queensland to the southern states. AEMO calculates the southern states send around 6 PJ/month to Queensland.

This much additional production could potentially be eked out from existing facilities, but most are already operating above 90 per cent capacity. Finding this production in Queensland alone would spare the exporters – Shell, Santos, and Origin – from sourcing gas via the southern states. Less demand will lower prices in those states, at least until the decline of Longford’s Bass Strait gas fields from 2023. There is little chance of Victorian gas development providing excess gas, hence the various LNG import projects under discussion in Victoria and New South Wales.

The pressure on domestic gas supplies is real and uncontested. National energy security demands development of gas resources in the southern states, and increased production from Queensland — enough to cover the export shortfall, to replace the declining southern fields, and to fuel increased gas-fired generation as coal power plants are retired.

The 6 PJ/month export shortfall equates to 200 TJ/d. A domestic production increase of at least 600 TJ/d would ensure low gas prices for the next decade at least. Increasing gas production by this magnitude requires around 1,000 coal seam gas wells and associated compression facilities. The proponent of such a project could expect little change from A$10 billion. The Narrabri Gas Project intends to supply 200 TJ/d into the New South Wales gas pipeline network — originally pitched as a A$3.6 billion dollar project in 2020, but probably more now.

A domestic reserve ensures gas supply cannot ever meet demand. The sensible solution is more gas production – enough to exceed demand from international and domestic users – breaking the cycle of energy scarcity. Now we see the folly of Victoria and New South Wales banning and stalling gas development over the last decade. More gas production means more jobs, more royalties, and lower prices. A reserve means continuing the cycle of scarcity.

Australia is well-placed to be an energy superpower. A government interested in long-term energy security and lowest possible energy costs should prove it.

Ben is an electrical engineer in the power and gas sector.

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