Interesting comments in today’s article from The Australian by Professor Peter Hartley of the University of Western Australia and former president of the US Association for Energy Economics. Professor Hartley is also an economics professor at Rice University in Houston and is leading a coal-seam and shale gas policy forum at Deakin University today. Plus he just happens to be a Northern Rivers’ local.
“NSW faces the nation's highest natural gas prices within a few years as an expanded ban on coal-seam gas production accelerates imports to the state via pipeline.
This is likely to make NSW a less appealing investment for industry, according to one of the nation's leading energy economists.
University of Western Australia professor Peter Hartley, a former president of the US Association for Energy Economics, said Queensland's export plants meant the nation's gas prices would rise to match Asian gas prices, minus processing and shipping.
But NSW may suffer more.
"If NSW does not have domestic supply, it becomes the big sink in the domestic network and the big importer," Professor Hartley said.
"All the other states have their own gas and NSW becomes the most expensive market, probably in Australia."
The development of $70 billion of coal-seam gas export projects in Gladstone over the next three years is expected to triple eastern states gas demand, sucking up most available gas just as many long-term NSW gas contracts expire.
The O'Farrell government's move last week to protect a further one million hectares of prime agricultural land from CSG production, along with horse studs and vineyards, has led to fears of looming shortages and price rises.
Professor Hartley, who is also an economics professor at Rice University in Houston, is leading a coal-seam and shale gas policy forum at Deakin University today.
He said demand and investment could be destroyed by higher prices. "Industrial gas users may prefer to locate to other states - you might think of going to Victoria, rather than NSW," Professor Hartley said.
The east coast states and South Australia are linked by pipeline, meaning once export plants at Gladstone start exporting, domestic consumers will be competing with Asian buyers for local gas.
The shift is expected to see traditionally low wholesale east coast prices of between $3 and $4 per gigajoule surge to as high as $10.
Professor Hartley said he was optimistic about the prospect of onshore shale gas production from the Cooper Basin in South Australia and Queensland, but he said it would take the higher prices the export plants are set to drive to justify high costs of development.
"It's more expensive gas and until prices on the east coast represent LNG netback, you're probably not going to see shale gas," he said.
He said the initial production rates from vertical test wells compared favourably to early results in Texas and Louisiana, where subsequent horizontal drilling spurred the shale gas revolution that has turned a US gas shortage into a glut.
"They are as good as the best of the North American vertical wells," he said.”
MEL Price at posting:
14.0¢ Sentiment: LT Buy Disclosure: Held
