Kevin Anderson & Hugh Hunt – A Rule Book for the Climate Casino

14 12 2018

https://ScientistsWarning.TV – Kevin and Hugh are back with us this year discussing the new ‘climate glitterati’ that come annually to Davos to feign concern about the climate while they discuss techno-fixes that might allow the (in their minds at least) to continue their excessive lifestyle that is heading us directly for runaway climate change and collapse.

Hat Tip to Chris Harries for this COPOUT chart…..




The Bumpy Road Down, Part 3

17 01 2018

Irv Mills has now published the third episode in his “Bumpy Road Down” series. It’s gotten a lot of interest on Facebook, and I think his own blog is getting a lot of hits too, as the interest in collapse ramps up everywhere as more and more people are waking up to the fact most things are going awry in the world….

I’ve already told him I disagree with his collapse diagram. For starters, the carrying capacity line is neither straight nor flat. So much farm land, particularly in India and North America has been decimated by fossil fuled fertilisers, that re-instating them to their former organic glory will be a huge challenge that will require a long time during which a lot of people will unfortunately starve. On top of this, we have wrecked global fisheries, which were an important pre FF source of food…  My best take on this is Paul Chefruka’s diagram which I published with his article here…  It too shows a bumpy road down, and no carrying capacity limit. I think the post FF carrying capacity will be the same as the pre FF carrying capacity, only worse thanks to the ecological damage our insane use of FFs has caused. How one quatifies this, I don’t know, but I’m sure it would take a lot of research.

Anyhow, enjoy the read, and make sure you comment, I’m always interested in what you think. Leave comments at Irv’s site too….  I’m sure he’d like the feedback!

 

IrvMills

Irv Mills

In the last post in this series I talked about the next financial crash and how it may well be serious enough to spread into the non-financial sectors of the economy and effect supply chains and critical systems in ways that we did not see in the Global Financial Crisis of 2007-08. Systems that most of us depend on for the necessities of life may fail and many kollapsniks see this leading immediately and inevitably to a hard, fast and permanent crash of industrial civilization.

I disagree, seeing this as just one more bump on the road down, the cyclic pattern of crash and partial recovery that I believe will characterize the rest of the age of scarcity.

To understand why I hold this opinion, I said we need to do a couple of things:

1) take a systems dynamic approach to the events we are talking about. Specifically, we need to look at what happens when overshoot occurs in nature, in systems like the one we inhabit. Which is, after all, a subset of the ecosphere. Overshoot is a common enough phenomenon and usually works in fairly predictable ways.

2) look at the sort of things governments, communities and individuals can do to limit the damage of a financial crash and its spread to other critical systems.

Today we are going to do that.

(Note: all three of the graphs below are smoothed out, idealized and imprecise representations of the processes they illustrate. The point is to allow me to make some points visually. I hope not to get into much in the way of quibbling over minor details, of which no doubt a few are missing, inaccurate or outright wrong.)

So, first, let’s take a look at how overshoot works. Take moment or two with your favourite search engine and you will find a graph that looks something like this:

1) typical overshoot situation with constant carrying capacity

The green line shows the behaviour over time of the population of a species which finds itself initially at a level well below the carrying capacity of its environment (the dashed blue line). Because that environment provides lots of whatever the species need to grow, it does grow. This tendency to grow in response to favourable conditions seems to be an inhernet property of life. As is always the case, this is exponential growth—it starts out slowly but eventually reaches a point where it takes off and quickly exceeds the carrying capacity of the environment.

What happens then is interesting, especially since we currently find ourselves in just such a situation. You get some oscillation of the species population, above and below the carrying capacity, until it finally settles out somewhat below the carrying capacity.

First, let’s be clear that it is possible to exceed carrying capacity in the short run, at the cost of damaging the environment and reducing its capacity—overpopulation has a negative effect on that capacity. There is also some time delay built in to the effect of population growth, as newly born individuals add relatively little to the species impact on the environment compared to what they will add once they have grown up. The negative feedback and the time delay result in the oscillation shown in the graph.

Of course, the straight line representing carrying capacity would actually have some peaks and valleys, corresponding to how the environment responds to the stress of overpopulation and how it recovers when the population falls. If we idealized both the blue and green lines into something like a sine wave, we would see that the variation in the carrying capacity leads the variation in the population by about 90 degrees.

The red line, by the way, represents a fast and permanent collapse. In order for this to happen the carrying capacity has to fall all the way down to basically nothing. This can happen for a variety of reasons, but overshoot isn’t one of them, because as soon as the population falls off below the carrying capacity, the stress on the environment is relieved and it begins to recover.

There is, in fact, no such thing as a “balance of nature” and it is by no means inevitable that the oscillations damp out and the population settles down just below the carrying capacity. In many cases what we actually get is the situation in the next graph, where populations oscillate on an ongoing basis.

2) continual oscillation of predator and prey populations such as foxes and rabbits

You might think that the population of rabbits and foxes in an ecosystem would level out at steady values, but that is not in fact what is observed.

If we start at a moment when there are relatively few of each species, we see that the population of rabbits (the prey, dashed blue line) grows rapidly. It is well below the carrying capacity of the ecosystem for rabbits and there are relatively few foxes (the predators, green line). But the increasing number of rabbits make hunting easier for the foxes, and their population starts to increase too. Eventually there are enough foxes to overhunt the rabbits, resulting in a crash in the rabbit population. This is followed by a crash in the fox population, since there are no longer enough rabbits to support it. This brings us back to where we started and the cycle carries on.

The reason the cycle can carry on indefinitely is that the foxes limit the rabbit population so that it never exceeds the carrying capacity of the ecosystem for rabbits—the plants the rabbits are eating never get over grazed.

The situation for the human population of this planet is, as you might expect, more complex.

The impact (I) that the human population has on our environment is determined not just by the size of that population (P), but also by the level of affluence (A) we are living at and effectiveness of the technology (T) we are using to maintain that affluence.

This gives us the famous equation, I=PAT. Since I am going to be using the term “T” in another equation shortly, I’ll change this to I=PAD, where “D” stands for decoupling. Decoupling is the use of technology to produce affluence at a lower cost to thge environment and it is a number between 0 and 1, with 0 being the goal we would aim for, eliminating our impact altogether. In fact it is proving so difficult to get decoupling anywhere near zero that it is very unlikely to be the solution to our problems.

Carrying capacity (C) also works somewhat differently for human populations.

We can increase the size (S) of our environment by expanding into new areas of the world and habitats previously occupied by other species or by “indigenous” humans.

We can tap into forms of energy (E) beyond just food. For somewhere between two and three million years we’ve been using fire for landscaping, for cooking our food and for heating our shelters. In each case we were using the energy in burning biomass to increase the carrying capacity of our environment, increase the value of our food, and/or expand the range of environments that we can live in. For the last few hundred years we’ve been using the energy of fossil fuels to radically increase the carrying capacity of our environment in many seemingly clever ways.

Since whatever method we use to acquire energy consumes energy in the process, it’s actually the energy that is left over, available for use (the surplus energy) that’s important. This is best expressed as “Energy Returned on Energy Invested”, EROEI. This is a dimensionless number and the larger it is, the more surplus energy. When the EROEI is equal to one, the process is just breaking even and there is no point in doing it—we want a much higher EROEI.

Hunter-gatherer and pre-industrial agricultural societies managed average EROEI’s in the high single digits at best. Industrial societies based on fossil fuels in the twentieth century had EROEI’s many times that high, which made possible high levels of growth and the development and use of technologies which had previously been completely out of reach. Today the average global EROEI is around 11.

Which brings us to our use of tools and technology (T). With just Neolithic technology (fire, stone tools, weaving, tanning, pottery, boats, agriculture) we spread over the whole planet except for the Antarctic, occupying and thriving in environments very different from the ones where we evolved. Since the Renaissance, the Enlightenment and the Industrial Revolution our use of technology has exploded. And not just material technology, but financial, organizational and information technologies as well. All of which has enabled both our population and affluence to grow at heretofore unprecedented rates.

So, the carrying capacity of this planet for the human race can be represented by the equation C=SET. Clearly, I (Impact) must be less than C (carrying capacity) or we are in overshoot. And since sometime in the late 1970s we have indeed been in overshoot. Currently the level of overshoot is around 60%. That is, our impact on the environment is 1.6 times what can be sustained on an ongoing basis.

3) oscillating overshoot with declining carrying capacity

From left side of this graph to point “a” we see the long and very slow growth of the human population before the discovery of the New World. After point “a” the carrying capacity began to increase significantly as the size of our environment effectively took a large jump with the European settlement of the New World, as the use of fossil fuels greatly increased the amount of surplus energy available and as we developed numerous new technologies to use that energy. Human impact increased with the carrying capacity, as our population grew and affluence increased.

The growth of carrying capacity continued until the last quarter of the twentieth century, point “b”, when depletion of fossil fuels and reduction of their EROEI, diminishing returns on technological innovation and stress on the environment from human activities started to reduce the carrying capacity.

Human impact has continued to grow since then, and is now so far above carrying capacity that one has to expect a crash in the near future, point “c”. As I said in my last post, this is likely to start with a financial crash. The financial sector of the economy, since it deals largely with non-material things that don’t have much inertia, can change very quickly. It is currently under a lot of strain from huge amounts of risky debt. I favour a scenario where a spike in the price of oil, brought about as the current surplus of oil bottoms out, sets off a currency crash in one of more countries, leading to a wave of bankruptcies and governments defaulting on their debts. After point “c” human impact will start to decrease rapidly, primarily due to the effect of the financial crash on affluence.

Note that I have again included a red line (and a light blue line), which represent a fast and permanent crash of both carrying capacity and population. This is possible and some would argue that climate change and ocean acidification (among other things) may be damaging the environment enough to make it the most likely outcome. I don’t think so. The ecosphere is amazingly resilient, once human impact is reduced. People have gotten the wrong impression about this because we have been playing the silly game of upping our impact and then wondering why the situation keeps getting worse, as if it wasn’t our fault.

To the right is a little chart that contains some shocking information. The top 20% of the human population (in terms of affluence) is responsible for 76.6% of our impact. A financial crash will be very hard on those top 20% and in the process will drastically reduce human impact. Sadly, myself and most of my readers are in that top 20%.

Referring back to diagram 3, I expect that at point “d”, where “I” is finally less than “C”, the carrying capacity will begin to recover, and a while later at point “e”, human impact will begin to increase once again as well.

Remember also that carrying capacity is defined by C=SET, and there is much that humanity can do to change the value of “T” in that equation. I am by no means saying that we will find a “solution” to our problems based on material technology. What I mean is that a major factor in the big decrease in carrying capacity during the upcoming crash will be the failure of our financial and organizational technology to cope with the situation. And there is a lot we can do to reorganize our financial, economic and political systems to work better under the new conditions. Once we are forced to do it. So I do expect there will be a recovery after this crash.

It is very likely that during the crash the financial chaos will spread to the rest of the economy and that there will be some reduction in the growth rate of our population as the support structures provide by industrial civilization fail completely in some parts of the world. But it seems likely that human population will continue to grow until it once again outstrips carrying capacity, at point “f”. And then at point “g” we will have another crash. I suspect depletion of fossil fuels, water for irrigation and phosphorous for fertilizer, and the effects of climate change will lead to a collapse of agriculture in many parts of the world. Famine and epidemics will at that point start to rapidly reduce our population and eventually reduce it back below a once more reduced carrying capacity (point “h”) and another recovery will begin (point “i”).

Beyond point “i” it is hard to say much about exact details or how many more crashes will take place. But the trend of continued oscillation with decreases in both carrying capacity and human impact will continue. The downward trend is because our current system relies on non-renewable resources that we are using up. That trend will continue until our impact can be sustained solely by renewable resources. Along the way we will go through some very hard times (point “i” and subsequent valleys in the green line) because of the damage done to the planet in the process. But eventually, with our impact drastically reduced, the ecosystems will recover. I expect that at this point we will have retained some of our technology and because of this the overall carrying capacity and our population/impact will settle out a bit above what it was in pre-industrial times.

One further thing I want to emphasize is how uneven this whole process will be. Yes it is likely that the impending financial crash, because it involves systems that are highly interconnected and global in scale, will be felt to some extent over the whole planet. But the degree to which the financial chaos spreads to the rest of the economy will vary greatly from place to place. And subsequent crashes, once the high degree of global interconnection has been broken, will most likely occur at different times in different places.

Wherever people are not completely dependent on global supply chains, the effects will be less severe. To the extent that they are not ravaged by climate change, some parts of the developing world where subsistence agriculture is practiced may continue on with little change. Unfortunately many areas will suffer the ravages of climate change—droughts, flooding and heat waves. Many countries (particularly in Africa and the Middle East) do not produce enough food for their own populations. With supply chains broken and agriculture struggling everywhere, these areas will find it difficult to continue importing the food they rely on. Supplies of energy and water will also prove problematical.

I am well aware that all these graphs and explanations do not constitute a proof of my assertions about the bumpy road down. But I hope I have succeeded in making what I’m trying to say much clearer. It’s up to you to decide if there is anything to it or not, now that you know what “it” is.

The other area I wanted to touch on today is the sort of things governments, communities and individuals can do to limit the damage when a financial crash spreads to other critical systems.

As the financial crash starts to gain momentum, governments will (to whatever extent they can) use the same tools as they did in 2008 to get things under control— loans and bailouts for faltering businesses, and keeping interest rates very low. It also seems likely that, as the situation worsens, “bail-ins” will be used as well, where depositors are required to accept discounts on their deposits to reduce the pressure on failing banks. And “haircuts” where bond holders have to accept discounts on the value of those bonds in order to reduce the pressure on the governments that issued them.

These efforts will have mixed results and the crash will no doubt spread to the non-financial sectors of the economy. Many governments will try switching failing critical systems over to a direct command “martial law” economy. This will be done with varying degrees of skill (or ineptitude as the case may be) and varying degrees of co-operation from their citizens. Vital materials which are in short supply due to supply chain and production breakdowns will be placed under government control and rationed (food, energy—especially diesel fuel, water treatment and medical supplies), and attempts will be made to patch supply chains and production facilities back together with whatever comes to hand.

I have no doubt that this can be made to work, at least to some extent. It does require convincing the public that it is necessary and that it is being done fairly—applied equally to the rich and powerful as it is to the poor and weak. And inevitably there will be thriving black markets.

Governments that already operate some of these systems directly will be better prepared and experience greater success. System that have been contracted out to the lowest bidder—companies that are primarily responsible to their stock holders rather than their customers—may fail in a variety of ghastly ways.

On the other hand, I think there will also be quite a bit of quiet heroism on the part of companies and individuals in critical industries whose job it is to keep things working. These folks are for the most part competent and highly motivated, and their efforts will be more successful than you might think.

Some governments will be so successful that their citizens may hardly be aware that anything is going on. In other countries, people will be reduced to relying almost entirely on what can be done locally, with locally available resources. Right wing capitalist governments whose primary obligation is to the rich and power will begin to practice wholesale abandonment of the poor and unfortunate.

There are also things that can be done by local communities, families and individuals to be more self sufficient—to be able to carry on during those periods when industrial society fails to supply the necessities. Increasing local inventories in order to be more resilient in response to supply chain failures would be a good beginning. But just being clear about what the necessities are and not wasting resources try to maintain luxuries will be one of the biggest challenges. The first step is realizing that much of what we consider necessary is, in fact, not.

So, as I’ve already said, I’m expecting a recovery, or rather a series of recoveries after a series of crashes. These crises are going to cause some changes in the way things work, resulting in a very different world. We’ll have a look at the trends that will lead to that new world in my next post.





Australia headed for energy crisis……

12 07 2014

The news coming in regarding Australia’s energy security are getting more and more worrisome.  Add to that the fact we will soon be totally out of oil, and you have to wonder “what next?”.  We are seemingly led by total morons who have no idea what they are doing, consider money to be far more valuable than energy, and in the process are leading this country to rack and ruin…..  How long we have left before all our chickens come home to roost is anyone’s guess, but the mining industry is already starting to sack people (and we haven’t even hit Peak Mining yet..), [official] unemployment is back up to 6%, and it’s high time the people of Australia got rid of the idiots in charge…..

Matt Mushalik

Matt Mushalik

Energy Super Power Australia’s East Coast running low on affordable domestic gas

In July 2006 then Prime Minister Howard declared Australia an energy super power. 2 years earlier his energy white paper set the framework for unlimited gas exports while neglecting to set aside gas for domestic use. It is a bitter irony that at the 10th anniversary of this energy white paper we read that gas shortages in the Eastern market will result in price increases and that there is not even enough cheap gas for gas fired power plants which are supposed to replace dirty coal fired plants or serve as a back-up for renewable power. Wrong decisions a decade ago (or even earlier) now come to the attention of the public as price rises hit the pockets of consumers.

And what has been completely forgotten is that natural gas is the only alternative transport fuel to replace oil. Conventional oil peaked in 2006 (Yes, Prime Minister, under your watch), US shale oil is likely to peak before 2020 and the Middle East is disintegrating in front of our TV eyes faster than energy and transport planners can change their perpetual-growth mindset. An energy equivalent of 5 LNG trains is needed to replace all oil based fuels in Australia. This gas is locked away in long term export contracts. Well done. Les jeux sont faits.

(1)          Recent events

Electricity providers return to coal-fired power as natural gas export revenue soars

3/7/2014
The rising international price of natural gas is causing electricity providers to return to coal-fired power, with Queensland among the first to make the move.

Fig 1: Tarong power station in Queensland

University of Queensland energy analyst Dr Liam Wagner says the rising price will push other power companies to make similar decisions.

“Gas-fired electricity is becoming more expensive; gas in Australia is going to become more expensive with exports,” he said.

“In the future we’re going to have less gas because it’ll be far more expensive to burn it here and the gas producers will be able to make more money overseas.”
http://www.abc.net.au/news/2014-07-03/electricity-providers-return-to-coal-fired-power-as-natural-gas/5567252

Nation will be paying the bill for poor energy policy

30/6/2014
The government, unlike other governments around the world, allowed unfettered access to global markets. The building of the export gas terminals will push the prices for gas inexorably up towards world prices. Indeed, wholesale gas prices are widely forecast to more than double to match international prices.

Many in the gas industry are calling for the rapid development of environmentally suspect coal seam gas fields in NSW to counter higher prices. This policy simply will not work as prices on the East Coast are now linked to world prices. No amount of domestic production will change this dynamic.
http://www.smh.com.au/comment/electricity-and-gas-prices-why-youre-paying-more-20140629-zspp1.html

As we can see in the following report, AGL is proud to have connected the domestic market to the Asian market to make quick profits, instead of developing a plan which would use gas domestically in the medium and long-term to maximise economic benefits for the local industry. The quarry mentality continues. The expected shortages are presented as an argument for even more coal seam gas.

AGL raises spectre of gas rationing if gas shortages are not tackled, it tells the NSW Government

17/3/2014
Gas shortages will lead to rationing along with job losses, especially in Sydney’s west, energy utility AGL has warned as it intensifies pressure on the NSW government to allow the development of gas projects in the state that tap gas trapped in coal seams.
http://www.smh.com.au/business/agl-raises-spectre-of-gas-rationing-if-gas-shortages-are-not-tackled-it-tells-the-nsw-government-20140316-34vgr.html

This is the report:

AGL Applied Economic and Policy Research

Solving for ‘x’ – the New South Wales Gas Supply Cliff

March  2014

“During this discovery and appraisal phase, it was evidently clear to resource owners that the east coast gas market was not sufficiently large enough to enable the monetisation of reserves in suitable timeframes and at the scale necessary to maximise profit, and so developing an export market for natural gas in the form of LNG was a logical strategic solution. Not only would it result in the rapid expansion of aggregate demand, but would also have the benefit of linking domestic gas prices, historically ca $3 per gigajoule (/GJ), to the north Asian export market price of ca $6-9/GJ equivalent ex-field ‘netback price’ over the medium term(p 2)

“On Australia’s east coast over the period 2013-2016, we forecast that aggregate demand for natural gas will increase three-fold, from 700 PJ to 2,100 PJ per annum, while our forecast of system coincident peak demand increases 2.4 times, from 2,790 TJ to 6,690 TJ per day. This extraordinary growth is being driven by the development of three Liquefied Natural Gas plants at Gladstone, Queensland”.  (p 1)

“Almost simultaneously, a non-trivial quantity of existing domestic gas contracts currently supplying NSW will mature. Much of that gas has been recontracted to LNG producers in Queensland – thus creating a gas supply cliff in NSW. Compounding matters, recent policy developments have placed binding constraints over the development of new gas supplies in NSW”(p 1)

Fig 3: NSW gas supply cliff lead to price increases

http://aglblog.com.au/wp-content/uploads/2014/03/No.40-Solving-for-X-FINAL.pdf

These developments are a bitter irony given that the public has been told many times that Australia’s gas resources are abundant. All LNG export contracts were presented as great achievements.

(2)  Wrong decisions 12 years ago

Although LNG exports to Japan had started in 1989 (20 years contracts with 8 power and utility companies signed in 1985), the 2002 LNG deal with China was Howard’s first main contribution towards a poor energy policy.

Australia Wins China LNG Contract

8/8/2002
John Howard: “I am delighted to announce that today I have been advised by the Chinese Premier Zhu Rongji that Australia’s Northwest Shelf Venture has been chosen by China to be the sole supplier of liquefied natural gas (LNG) to its first LNG project in Guangdong province.”
http://australianpolitics.com/news/2002/08/02-08-08.shtml

5 months earlier, John Akehurst, Woodside’s Managing Director, warned in a report with mixed messages:

Mar 2002

Challenges for Australia

Australia has large gas reserves which have the potential to meet a much larger proportion of Australia’s energy requirements, including liquid petroleum requirements (via CNG, LNG, Gas to Liquids). Gas for oil substitution would deliver significant greenhouse benefits and help Australia meet its Kyoto target. Increased LNG exports would partly offset the cost of rising liquids imports and help address their impact on the balance of payments.  (p 8 )

However, greater use of gas will require substantially more investment in gas production and pipeline infrastructure. Without such investment, south eastern Australian gas markets will, within a few years, face possible gas shortages. Major consumers will find it more difficult to secure long term supply contracts on sufficiently competitive terms (p 9)

Fig 4: Superimposition Akehurst forecast with actual production

LNG export projects and gas-based value adding projects are needed to underpin the cost of bringing new gas supply sources to shore and to justify the initial investment. These types of projects compete on world markets (primarily with projects in Asia) and the provision of an internationally competitive investment environment including fiscal terms is a key driver. (p 10)
www.aspo-australia.org.au/References/Akehurst%20ABARE%202002.pdf

Of course one cannot have it both ways. To replace petrol and diesel in Australia one would need the energy equivalent of 5 LNG trains.

(3)          Howard’s flawed Energy White Paper June 2004

Fig 5: excerpt from Howard’s June 2004 energy white paper

This white paper just rationalises decisions already made earlier by formulating following policy principles  (p 53)

  • Commercial decisions should determine the nature and timing of energy resource developments, with government interventions being transparent and allowing commercial interests to seek least-cost solutions to government objectives (e.g. environment, safety or good resource management objectives).
  • Government objectives should generally be driven by sector-wide policy mechanisms rather than impose inconsistent requirements on individual projects/private investors.

And on page 128:

Australia’s gas reserves are sufficient for more than 100 years at current production levels, or more than 200 years of current domestic consumption. Furthermore, prospects for finding and proving up more gas are good, subject to finding markets. However, the location of Australia’s major gas reserves—to the north and north-west —compared with major demand locations—to the south-east—is sometimes raised as an issue (see Figure 6 and 3 in Chapter 2—Developing Australia’s Energy Resources).”

Note the term “At current production levels” which of course is irrelevant when LNG exports are doubled or tripled.

Fig 6: Map of oil and gas resources in the EWP 2004

Fig 7: Map of gas pipelines in EWP 2004

http://pandora.nla.gov.au/pan/10052/20050221-0000/www.dpmc.gov.au/publications/energy_future/docs/energy.pdf

The Geoscience Report “Oil and Gas Resources in Australia 2004 writes: Natural gas has a current “life” estimated at 65 years, but past estimates have been as low as 39 years (in 1993) and as high as 76 years (in 2001). These estimates include all resources and production in the JPDA with Timor-Leste.”

Fig 8: Geoscience Australia’s reserve to production ratios

http://www.ga.gov.au/image_cache/GA8550.pdf

The EWP 2004 continues to argue:

“Predictions are made that supplies of gas to major urban markets will run short in the next decade, as production in the Cooper Basin and Bass Strait declines. This has resulted in calls for financial support towards the building of major pipelines from either the Northern Territory (to access gas from Sunrise and other Timor Sea fields), Papua New Guinea or north-west Australia (to access gas from either Carnarvon or Browse Basins). While reserves of gas in existing fields close to southeast markets are declining, this does not represent an energy security concern.

Exploration is occurring in the south-east and is resulting in new discoveries and development, such as in the Otway Basin. The development of coal seam methane is also increasing supplies of gas in the region. In addition, holders of the large remotely located gas reserves are actively seeking markets to monetise these reserves. These efforts include actively investigating pipeline projects for bringing supplies of gas from north and north-west sources, as well as seeking LNG export sales in Asian markets. The number and activity of these competing proposals provide a degree of confidence that these supplies will become available once economic, noting that this will in all likelihood occur at higher price levels than those currently enjoyed in some south-eastern markets.

Given the size and placement of gas reserves relative to current and future gas demand, gas supply is not likely to become an issue for the short to medium term. Pre-empting market outcomes in these circumstances is unlikely to add significantly to energy security, but could inflict significant costs by precluding less costly options (such as further development of the Gippsland and Otway basins or coal seam methane).”

http://www.efa.com.au/Library/CthEnergyWhitePaper.pdf

The task of building North/West-East gas pipelines was not pro-actively followed up by State and Federal governments but dropped altogether in favour of exports. No wonder this laissez-faire approach went wrong.

CO2 emissions

The EWP 2004 argues:

“The shape of future international action on climate change is unclear, but the potential costs of future adjustments and long life of energy assets makes it prudent to prepare for the future.” ( p 131)

LNG development could increase Australia’s energy emissions by around 1 per cent of energy sector emissions. However, to the extent that exported Australian gas replaces more greenhouse intensive energy in the importing country, global emissions may decrease as a result of Australian gas production  (p 137)

This is just an argument in favour of LNG exports while none of the LNG contracts included a clause that coal fired power plants equivalent to the energy content of the gas should be decommissioned in the destination country. The above example of Queensland going back to coal shows that not even in Australia the job of using gas to reduce emissions is taken seriously.

(4) Energy super power declared in 2006

17/7/2006
The Prime Minister has outlined his vision for energy and water, saying the nation has the makings of an energy superpower.
http://www.abc.net.au/news/2006-07-17/howard-outlines-energy-superpower-vision/1803744

(5) Actual gas production

Let’s have a look at gas production statistics

Fig 9: Australia’s gas production 1977-2013

 Data are from APPEA: http://www.appea.com.au/?attachment_id=5192

We see peak gas in the Cooper basin between 1999 and 2002 at around 260 bcf. Right at that peak, Howard failed to pursue building a gas pipeline to connect Western offshore gas with Eastern gas markets.  While LNG exports on the West coast surged, the East coast remained on a bumpy production plateau.  Western Australia has a 15% Domgas policy but also did not introduce gas as a transport fuel. As WA’s LNG gas goes out the window, Queensland and NSW are forced to go for environmentally questionable coal seam gas.

Fig 10: Australia’s LNG exports

The first 3 trains (2.5 mt pa each) mainly supply Japanese utilities, while the Guangdong contract (3.3 mt pa over 25 years) required train 4 (4.4 mt pa)

(6) Conventional gas depletion in NSW, Victoria and South Australia

The Australian Energy Market Operator (AEMO) estimates in its Gas Statement of Opportunities 2013 that current conventional 2P reserves would be depleted by the mid of the next decade.

Fig 10: Depletion of conventional gas reserves (2P) in the South East

“Under the modelled production-cost conditions, consumption of Denison Trough 2P reserves occurs first in 2019. Consumption of Otway Basin 2P reserves begins in 2020, and it is completely consumed by 2023. Bass and Cooper basin conventional 2P reserves are consumed in 2025. Gippsland 2P reserves are consumed in 2026. The 2P CSG reserves in Queensland are sufficient to supply demand until the end of the 20-year outlook period.”

Fig 11: Gas shortfalls in the South East

 “Additional 3P reserves and 2C resources are available in the Otway, Bass, Gippsland, and Cooper basins. The 3P/2C reserves in the Bass, Gippsland, and Cooper basins are sufficient to ensure supply until the end of the 20-year outlook period, provided current transmission and production limitations remain unchanged. The 3P/2C reserves in the Otway Basin are only sufficient to ensure supply until 2028 or 2029, depending on the level of support the southern states receive from production in the north.

Given its role in supplying demand in Adelaide, Melbourne, and Sydney, the Otway Basin reserves consumption is a significant event, with substantial infrastructure investment required to manage changing system flows.”

http://www.aemo.com.au/Gas/Planning/Gas-Statement-of-Opportunities

(7) Domgas Alliance report

Australia Domestic Gas Policy Report (Nov 2012)

History has proven that countries with large resource endowment do not automatically gain an economic competitive advantage over countries that do not have such surplus endowment of resources. Exporting countries have to take the necessary precautions to avoid what are known to economists as the Natural Resource Curse and Dutch Disease. Australia’s large LNG export boom, that is well underway, has the capacity to trigger both of these symptoms and the subsequent regrets.

Gas resource rich countries rely on a comprehensive menu of interventions and gas regulations and policies in order to protect the national interest and the best interest of the general public regarding the use of indigenous gas production. Benchmarking illustrates that Australia does not manage its gas resources adequately to ensure that gas explorers and production companies operate in a manner that is consistent with a vibrant domestic gas market.

Gas resource rich countries, regions and continents generally export gas only after they first develop their own domestic gas market into a vibrant one that has very high gas consumption rates per capita and a high gas penetration in the total primary energy supply. To do otherwise destroys value and effectively de-industrialises the exporting region.

Australia needs to have sufficiently comprehensive policies and regulations in place in order to control and manage the export of raw commodities. Simply relying on market forces without comprehensive guidelines and controls to mitigate inequitable market power is one extreme while nationalising all resources is the other extreme. Neither of these scenarios has proven to serve the public interest very well.

http://www.domgas.com.au/pdf/Media_releases/2012/Australia%20Domestic%20Gas%20Policy%20Final%20Report.pdf

(8) Gas price outlook

The following graph from the Eastern Australian Domestic Gas Market Study by BREE, Department of Industry, shows Energy Quest’s doubling of gas prices by the end of this decade.

Fig 12: Gas prices will double

http://www.industry.gov.au/Energy/EnergyMarkets/Documents/EasternAustralianDomesticGasMarketStudy.pdf

Summary:

Decisions on excessive LNG exports have been made more than 10 years ago and are irreversible. They continued ever since – irrespective of which State or Federal governments were in power –and will lead to yet more LNG exports.  Consumers will have to pay higher gas prices for having elected these governments.  Another regret will come in the next years when it becomes clear that gas is needed as transport fuel.

Fig 13: Glimpse into the future: truckies protest drive around  Canberra’s Capital Hill

Previous articles on this website on gas

9/5/2012    Queensland plans to export more than 10 times the gas NSW needs (part 3)
http://crudeoilpeak.info/queensland-plans-to-export-more-than-10-times-the-gas-nsw-needs-part-3

6/5/2012   Howard’s wrong decisions on offshore gas exports start to hit transport sector now
http://crudeoilpeak.info/howards-wrong-decisions-on-offshore-gas-exports-start-to-hit-transport-sector-now

13/10/2011    NSW gas as transport fuel. Where are the plans?
http://crudeoilpeak.info/nsw-gas-as-transport-fuel-where-are-the-plans

11/10/2011   Australia’s natural gas squandered in LNG exports
http://crudeoilpeak.info/australias-natural-gas-squandered-in-lng-exports