Natural gas turns the world upside down: A depressingly familiar tale.

lock the gateLike the UK, Clyde Russell comes from a small island off a large continent, in his case Tasmania.  But he’s been writing some great stuff from his vantage point looking at the other great disruption of the 21st century in world natural gas, the emergence of Australia as a second Qatar in its potential for LNG exports

For those who haven’t been looking at it, i.e. just about everyone outside of the global LNG industry, this comes as a surprise. Australia’s LNG capacity has taken even longer than the US shale industry to reach serious production and at a far higher cost.

Timeline of Australasian LNG projects from FID until delivery

This slide shows the massive amount of LNG that will be headed everywhere shortly, even according to Russell recently, to Europe. An Australian LNG cargo even made it to Mexico last month.

WM H1 2015 view of LNG ramp vs operator guidance

The projects can be divided into three. PNG is Papua New Guinea and not actually Australian. It started in 2014 and is one of the few projects not to overrun in time or cost. That wasn’t a problem in offshore mega projects, including the aptly name Gorgon:

It took more than six years to build, US$54bn to finance and 800km of pipelines to make it work, but Chevron’s massive Gorgon gas project off the coast of Western Australia is poised to finally ship its first cargo this week.

The liquefied natural gas project is one of the world’s largest, and a feat of engineering in one of the most remote and harshest environments on the planet. It is also a key factor in forecasts that Australia will overtake Qatar as the world’s top LNG exporter within a few years.

But there is a third component, and here we see a depressingly familiar parallel between shale and LNG. The Queensland Coal Seam Gas project, or QC LNG or Gladstone project as it’s sometimes called is an onshore gas project that is most definitely not shale but is “unconventional”.  The project was seen in its early days as relatively benign. Queensland’s coal industry is one of the largest global exporters, and even the right wing Queensland State government back in 2002 was feeling guilty and saw Coal Seam Gas (or Coal Bed Methane) to give its other name, as a way of replacing coal with gas not at the point of use, but at the point of production. It’s also fair to say that the project, along with the rest of Australian LNG was only possible in the Peak Oil economics era.

Anyone else in the world has long seen Coal Bed Methane as having been so quickly obsoleted by shale, that the industry has effectively ignored the technique. Shale is far more productive and has far less costs, including environmental ones. CBM is only a cottage industry most places these days, and with the exception of the odd Indonesian or Chinese project, it’s as economically pointless as it is environmentally hazardous. But QCLNG was the first internationally and certainly the biggest. Once FID takes place on projects this big, it’s pretty much impossible to slow it down. But environmentalists in Australia “informed” the UK and US debate with the result that they actually take CBM seriously. CBM was described even by the gas industry ten years or so ago as being as “unconventional” as shale. Proving yet another case sadly where both greens and the “conventional” gas industry were fighting the battles of 2006.

(It is no help that the patently absurd UK Methane project from a two man band in a Cardiff industrial estate was actually given licenses in the UK. Instead of waiting for the project to die a natural death, it was corralled into what should be serious debate on shale in the UK by default. UK Methane has produced as little light as they have molecules, but have caused much heat amongst UK shale activists who actually take it seriously when it’s only an embarrassing joke to anyone else. The fact they don’t even have a web site 9 years later speaks volumes).

Back to reality though, and Clyde Russell’s excellent Reuters piece sets the stage for some problems that are depressingly familiar not only in the UK, but even in the US these days when the Bernie Sanders/Josh Fox alliance has achieved the almost impossible: Sanders gets less grilling from US journalists on energy policy than Trump gets on immigration or world politics.

It should be a golden age for Australia’s liquefied natural gas (LNG) producers as they sit on the cusp of becoming the world’s largest supplier of the fuel that holds the largest growth potential among its fossil rivals.

But instead of taking a moment to reflect on its achievements, industry leaders used their annual conference to both lament and lambaste what they believe are unfair attacks on LNG from a variety of sources.

In a marked change of tenor from conferences in prior years, it seems the LNG industry now knows who its enemies are, but is less certain how to tackle them.

Enemy number one is the rising tide of environmental activism that is managing to sway public opinion against new natural gas exploration and production, and also influencing politicians that had previously been champions of the industry….

To many in the LNG sector it’s a struggle to understand why they attract the ire of environmental activists, given the industry’s view that natural gas is a better alternative to coal and one that can realistically be used as the world transitions to renewable energy from fossil fuels.

The industry has been slow to realise that for some green groups all fossil fuels are evil and must be opposed vigorously, and they have stepped up campaigns against the extraction of natural gas from coal seams, the method that supplies the three new LNG plants in Queensland state.

Russell does see where a solution might lie:

But how can the industry fight, or at least lessen the impact of, environmental activism?

Up until now they have relied on trying to counter arguments with fact-based publications and articles and working with the communities in which they operate.

This may help them in the rural areas where they operate, but it doesn’t defeat activists who are very skilled in using social and mass media to publicise their views, which are often filled with misinformation and half-truths. 

In short, the industry has been playing Mr Nice Guy against people who have no interest in dialogue, cannot be won over by respected science and are prepared to walk very close to the edge of legality in their tactics.

How exactly the LNG industry can take the gloves off while still meeting corporate legal requirements is difficult to see, but a more determined campaign may be in order if they are going to grow in future years.

UK and US shale makes many of the same mistakes, thus my highlighted passage above. They do work effectively to varying degrees with local communities. But they often face those issues because the first things locals see is either online or in-person via misinformed greens who take country holidays in Yorkshire or upstate New York, assisted by the Green Tea Party who come up from Brighton, Brooklyn or in Queensland’s case the hippie nirvana of Byrons’s Bay. These guys aren’t as stoned as some of them look. They are well informed, know how to play most media like plucking a banjo and have the gift of making the entire zeitgeist hum along with their catchy new number “Keep It In The Ground” or the Oz rural number “Lock the Gate”.

I make two suggestions, one strategic,  and one modest, if self-serving.

Strategically, the entire gas industry, up-, mid and down- stream has to stress how there is only production because of consumption.  Specifically the industry should ally themselves with end users in China, India, Japan and Indonesia and separate themselves strenuously away from coal. By end users we can broadly define governments, power plant owners and the rest of society who see climate as not just cutting CO2 but also as a public health issue. Within those countries they should especially ally themselves with Asian (and African) environmentalists. They’re aren’t enough of those groups, but there are some. Work with them instead of trying an endless battle against those who don’t want to be convinced, and who often prove how in the West at least, Green is the new White.

The second suggestion is to look just to your right at the second box from the top. If this message makes sense, it’s worth spreading it.

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