Is gas the answer to our energy crisis?

Ross Greenwood speaks to former CEO of Santos, John Ellice-Flint about why opening gas reserves and creating gas pipelines in the south and north of the Country, could be the answer to our energy crisis.

Ross Greenwood: Great to have your company here on Money News right around Australia. For a long time, we’ve told you about electricity shortages in our national grid, which is saying even this summer, outages in Melbourne, in South Australia, which really are unacceptable to the Australian community, then you sit there and say, “Well, what are the answers to these?”

Some people say, “Build coal-fired power stations.” The government, of course, building Snowy 2.0 to try and create the capacity to replace one of the coal-fired power stations, most likely Liddell, when it comes off stream.

Then many people say, “Look, the most efficient way to do it is to actually have solar firms, giant solar firms backed up by gas generators.” The reason why gas is important is if the sun is not shining gas instantly can come on, and as a result electricity can be generated. Then you read reports, as we did this week out of the Australia newspaper, the chief executive of Energy Quest, Graeme Bethune, has written a report that effectively after 2026, there are no known proved and probable reserves that can make demand.

In other words, he’s saying, “Not only is there the overseas demand for Australian gas, which comes out through Curtis Island, Gladstone, but on top of that, you’ve actually got to go and find some new gas.

Today, for example, the Queensland Government has said that they want to try and get up a $10-billion gas project in the Surat Basin to try and get going next GE. Now, that’s not necessarily part of the answer that Graeme Bethune is looking for because that is already known about, but in this particular case, 14 petroleum leases have been approved. Then, today, what happens is another statement comes out in this particular case from Blue Energy.

Now, Blue energy is basically saying that there is enormous potential in Queensland’s Bowen Basin to be a major contributor to Australia’s diminishing East Coast gas supply. Now, the reason this caught my attention is because Blue Energy has got a chairman. That particular Chairman is John Ellice-Flint who we’ve spoken to on this program several times in the past. He has got skin in the game as the former chief executive of Santos and he’s on the line right now. John, as always, many thanks for your time.

Interview with: John Ellice-Flint, Former CEO, Santos

John Ellice-Flint: Thank you very much, Ross.

Ross Greenwood:  Explain to me why the Bowen Basin could potentially answer some of the potential shortages that Graeme Bethune talks about over the next three or four or so.

John Ellice-Flint:  The Bowen Basin is currently a producing base and it’s got a very small pipeline that actually supplies gas transport to the power station there to the old nickel refinery. That has been producing since 1996 when CH4 Energy first started producing coal seam gas. That’s really the home of coal seam gas in Australia. As you know, coal seam gas comes from coal that’s mined up in the Bowen Basin. Bowen Basin is the most significant coal area for Australia, and that’s where we export most of coking coal to the world for steel manufacturer.

This basin has got a history. The interesting thing about it is that the EIS, the environmental impact plan was approved for two foreign companies. One company is Arrow Energy, and it’s owned 50% by Shell and 50% by PetroChina. That was approved governments. They’ve got all the government approvals to develop this particular project that was originally approved in 2014 and the pipeline was approved two years ago.

Here, we have a development plan with compression, oil infill pipelines, et cetera, that is fully approved by the government, and all we’re doing is waiting on to go to the final investment decision.

Ross Greenwood:  Okay. Effectively, John, what I’m thinking here is, your managing director, John Phillips today said the northern Bowen Basin, as you point out is already a significant gas province. There’s existing discovered gas resources, about 15,000 petajoules, enough to supply the domestic market for the next 30 years, so it’s a significant resource.

Also, Blue Energy, today, has upgraded its own gas resource by an extra 237 petajoules. What you’re saying is really it needs a bit of pipeline in it into the National Grid, and on top of that, also, what it needs is the ability for more exploration to unlock more of these reserves in this particular basin?

John Ellice-Flint:  Correct. Most definitely. One large pipeline to the south into the southern grid to put gas in houses and industries of Victoria and New South Wales, and probably a larger pipeline to the north because we’re talking about 6,600 wells here to open up northern Australia. This could be the engine for Northern Australia.

Ross Greenwood:  Do you think these results, potentially, is enough to overcome the gas shortages that are being predicted over the next decade?

John Ellice-Flint:  Well, it’s a good start along with announcement, today, of what’s going on. They’re both approximately $10-billion projects. Obviously, the Bowen Basin hasn’t been approved yet, that’s up to the two foreign-owned companies, but that would kick-start; and exactly what you said in your introduction, input here is the combination of interruptible energy sources such as solar and the ability to firm that electricity and put it into the AC grid. That’s what Australia needs.

Ross Greenwood:  The real issue, as I’ve understood it up until now, is that there are even gas generators now that either have not been able to get the gas, or if they can the gas has been so expensive domestically because of the shortages that are there already in the system, that there are times when they have to question except when electricity prices are at the very highest levels, as to whether they’ll actually turn on the generators at all.

John Ellice-Flint:  Yes, that’s been the case because we haven’t had effective supply in the system, and a lot of that has been going to fill the LNG trains, but we actually need to have a market to make our sovereign contracts that are out there to 2025, 2030, as well as domestic industries.

I think that it’s little understood that the role of gas, 93% of the houses in Victoria need gas and they got dramatic decline in the gas coming from base stripes. The ability to make a lot of products that we use in everyday life that needs gas, to fire glass, to make glass you need gas, all our petrochemicals, all our plastics. The imports in everyday life of fossil fuels is solely misunderstood in Australia.

Ross Greenwood:  It does seem bizarre, and even Graeme Bethune was saying this the other day as he was talking about the shortages, that maybe LNG import terminals were really the only answer. Now, there have been a number of projects scoping out the prospect of bringing gas from the northwest shelf in Western Australia to the eastern seaboard, and yet it seems bizarre when there is gas below our feet on the eastern seaboard, that we would even contemplate bringing gas in from the other side of the country.

John Ellice-Flint:  Yes, I think the politicians have got to look at themselves, advice at state-federal level and say, “Where is the gas that’s ready to go?” This is a basin, the Bowen Basin has got over 300 wells, and so they’ve got explorations, they’ve got delineation wells. They’ve run in excess of 20 pilot production systems. Everything is in place. If you want to fast track it, that’s the first place to go.

Obviously, Santos is doing its bid in Cooper Basin around zone infrastructure, so everyone is getting cracking, but this problem really gets back to the GFC and then the collapse of the oil price because the exploration of production companies didn’t spend any money; they couldn’t because they were losing money when oil was down at $40, $50 a barrel. Their balance sheets weren’t in good order.

Ross Greenwood:  I’ll tell you, it’s always great to have you on the program. One of the real, elder statesman is a bit too strong a word to put it, is not that all, but I’m going to tell you, certainly, one of the people who is most respected in the oil and gas industry in Australia, the former chief executive of Santos and currently chairman of Blue Energy that upgraded that resource in the Bowen Basin, today. John Ellice-Flint, I appreciate your time in the program this evening.

John Ellice-Flint:  Pleasure, Ross. Thank you very much for having me.

Image source: 2GB

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