Why do we have a gas shortage?

Australia produced 27% more last year yet we continue to pay more!
CEO of EnergyQuest Graeme Bethune talks about the gas shortage

Introduction: Why do we have a gas shortage?

Ross Greenwood: Mean time, there’s something else that will make you scratch your way because you might have heard that the government has mandated that export licenses can be at least deferred or delayed, or halted if there is not enough gas in the Australian system to create the electricity in sufficient quantities.

Well, guess what happened last year. In the last financial year, the actual airport of gas in Australia rose by 27%, rose by 27% to a record level. Think about that. We’ve got a gas shortage, but the amount of gas we produced was up by 27%. Now, that comes to oil production which was actually at a 40-year low. The man who’s put these numbers out is Graeme Bethune. Now, Graeme Bethune who was a long time with Santos, significant player there at Santos and knows about this stuff is now the Chief Executive of a company called EnergyQuest who’s on the line right now. Many thanks for your time, Graeme.

Interview with Graeme Bethune, CEO, EnergyQuest

Graeme Bethune: Hi there, Ross.

Ross Greenwood:  The ordinary person, and me as included, actually looks at that and goes, “We increase the amount of gas we produced by 27% and yet we have gas shortages.” That just does not add up to anybody who is an ordinary thinking person in Australia. How could that possibly have come to this?

Graeme Bethune:  Yes, well, I guess demand has increased enormously as well. Going back a few years, the amount of gas we exported was about the same as the amount we used domestically, but the amount we’ve exported is now twice what we use domestically. That’s happening on both the East Coast and also on the West Coast. The supply, unfortunately, is catching up with that, but it hasn’t been able to completely catch up because of the well-known restrictions on gas development, particularly in New South Wales and Victoria, plus some other regions too.

Ross Greenwood:  Okay. Let’s go to this. If Australia ultimately is to have enough gas to fire those gas fired power stations, then ultimately, we’re supposed to replace the coal fired power stations. Are you saying it’s simply a case of we’re going to go and find more gas? Or is it a case that we could arguably corner off some of the gas that’s currently going overseas as the government is proposing and try and redirect that into local electricity generation?

Graeme Bethune:  It’s a complex issue. I don’t think any major exporting country like Australia wants to restrict exports, but certainly, the government has got that option now. That’s the decision they’ll be having to make. Fundamentally, it’s a matter of finding more gas and developing more gas with this onshore in Victoria and New South Wales, or for that matter, offshore, Victoria as well, in Bass Strait where a lot of our gas used to come from.

Ross Greenwood:  Okay, but you know that this is more than just about anybody. How much exploration is actually going on for that gas that is required either locally or indeed for export? Is it much going on right now?

Graeme Bethune:  Well, basically, you can’t explore in Victoria onshore. It’s very, very hard in New South Wales. There hasn’t been much offshore in Victoria either, but we are starting to see a bit of a pick up in exploration now both onshore and offshore, but it takes years to have a major impact.

Ross Greenwood:  Okay, then tell me as to why it is that the output of oil hit a 40-year low. Why is it that we’re producing less oil in Australia than what we have for the last four decades?

Graeme Bethune:  Well, again, because a lot of what I call the legacy fields are getting pretty old now, and they’re past their peak. Bass Strait, which used to produce a lot of the Australian oil, there’s been some drilling there since the 1960s, so all these fields decline over time, and the same is true offshore west of Australia as well.

Ross Greenwood:  In other words, if we don’t go out and find new fields and continue exploration, then ultimately, we could dwindle away. I presume also, in the production of gas, there is also the byproduct of condensate, which is almost the equivalent of a very light, light oil, isn’t it?

Graeme Bethune:  That’s right. Yes. Particularly for the West Australian LNG projects like Prelude and Ichthys, and Gorgon, they do have condensate with them as well, as those LNG projects ramp up and do supply a lot of condensate and the LPG likely used in barbecues.

Ross Greenwood:  But there’s one other aspect of this, if we do not produce oil for ourselves, we are highly reliant on places such as Singapore. We know already, of course, that our fuel is mostly coming from Singapore. That makes us, from a security point of view, more of a risk.

Graeme Bethune:  That’s right. I mean, we only really produce a very small percentage of the current amount of oil that we use. You’re right, the petrol and diesel comes from Singapore, or for that matter, from South Korea and Japan.

Ross Greenwood:  Tell you what, Graeme Bethune, always good to have you on the program, because he’s got such a big footprint across all of this information. Think about this, 27% rise in Australian gas but we have shortages of gas, and also a 40-year low in our production of oil in this country. The chief executive of EnergyQuest, Graeme Bethune, thanks for your time.

Graeme Bethune:  Appreciate it.

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