Such times!

There is so much on the menu, both officially and unofficially, at the UN’s gabfest about climate change (“CoP 23”) in Bonn that it is inevitable media coverage amounts mostly to “snatch and grab” as I recently saw one journalist say when she meant “smash and grab.”

Between the activists, who treat the UN meetings as an opportunity for headline-grabbing and ritual defenestration of anyone speaking up for fossil fuels, and the politicians (from Angela Merkel to people whose names you won’t remember beyond your next sleep) hunting domestic kudos for virtue-seeking (eg Canada’s environment minister “declaring war” on coal for a country that has 10 per cent of the fuel in its power mix and nevertheless is struggling to meet the promises it made in Paris in 2015), the flow of information is pretty indigestible.

When it’s all done there hopefully will be a set of rules for carbon mitigation and keeping track of the Paris commitments thanks to hard work in back rooms but the visible process is living down to past standards.

Meanwhile, by way of an essential backdrop (for the few looking beyond Bonn’s funny business), there is the carefully coincident publication of the International Energy Agency’s latest World Energy Outlook.

Just one aspect of this should represent rather grim news for the shoals of government officials and ministers swimming through CoP23’s waters. Oil, says the IEA, will continue to grow as a source of global energy over the next two decades, driven by continuing demand growth in the large communities of what we used to call the “developing world,” quite a lot of its in our own Asian backyard.

The much-hyped take-up of electric cars forecast for the years from now to 2040 will not serve to consign oil to the scrapheap of history, opines the IEA. This inconvenient indicator, along with a predicted 45 per cent increase in demand for natural gas and continuing substantial use of coal, makes a mockery of the “death of fossil fuels” mantra that crops up practically weekly in public debate.

The IEA attributes the ongoing major growth in energy demand (rising 3.4 per cent a year) in the main to “a population that expands from 7.4 billion today to more than 9 billion in 2040 and a process of urbanization that adds a city the size of Shanghai to the world’s urban population every four months.” (That’s 12 Sydneys a year if you do the maths.)

As I have said here on more than a few occasions, I have problems with the language the agency employs as in its public statements in playing to the renewables gallery. In this new report, for example, it includes as a headline in its media briefing “coal strikes out” – and then tells us that, after adding 900,000 megawatts of coal-burning capacity to the global generation mix between 2000 and now, there will “only” be a net addition of 400,000 MW to this part of the world’s power supply between 2017 and 2040. Howzat?

Moving on, our local upstream petroleum producers see the IEA’s new report as an early Christmas present.

In a new media statement, Malcolm Roberts, CEO of the Australian Petroleum Production & Exploration Association, explains why “the IEA forecast of an increase in the share of gas in global energy demand is great news.”

Roberts says: “Our $200 billion investment in LNG projects will supply a growing global market over the next 25 years.  This means Australians will see a steady stream of high paying jobs, export dollars and revenue for governments for decades to come.

“Most of the growing demand for natural gas is expected to come from China, India and other countries in Asia that have significant concerns over air quality. Our proximity and reputation for reliable supply make us well-placed to capitalise on this growing opportunity.”

He adds: “The World Energy Outlook also highlights the environmental credentials of gas as a cleaner-burning power source and a key part of moves to reduce carbon emissions in Australia and around the world.”

And, of course this news is another peg on which APPEA can hang its constant message to our policymakers, federal, State and Territory, and to voters (supposing they ever get this point). “The IEA report,” says Roberts, “also highlights a major challenge for Australia, with the United States expected to become the world’s leading LNG exporter by the mid 2020s. The opportunity (for us) is huge but our competitors are hungry. In an extremely competitive global market, we cannot be complacent.

“If Australia is to capture further investment in LNG production, it is vital we get the policy settings right by maintaining a stable and competitive tax regime and reducing regulatory costs.”

Despite the value of the existing gas industry (serving export and domestic markets) for our economy – via jobs and local industry expenditure – and for government income via taxes and royalties, I fear our community in the eastern States (making up 86 per cent of the population) just now doesn’t give a hoot for the global opportunities; the focus here is on current domestic needs in terms of adequate supply and prices well below today’s levels.

Ongoing gas production developments targeting the overseas market — Chevron’s 8.9 million tonnes a year Wheatstone project is in its commissioning phase while the 3.6 million tonne capacity Prelude floating LNG facility, operated by Shell, and the 8.9 million tonne Ichthys venture by Japan’s Inpex are due to start production next year – just don’t get the popular media attention of yesteryear and may even rub salt in the pain of consumers in the mass market, farming and manufacturing because they underscore that half of our gas production goes abroad (and it will be more by 2020).

The contrast with America is stark: despite expected rapid LNG export capacity growth, the US Energy Information Administration’s Annual Energy Outlook 2017 projects their trade to amount to only about nine per cent of total domestic natural gas production by 2020. And US domestic gas prices are far lower than they are here.

It’s not surprising in this environment that our West Australian friends see opportunity – with an “O” – in the east or that the Turnbull government (struggling critter that it is) sees value in a feasibility study in to a $5 billion pipeline serving the five mainland States on this side of the Nullabor. Even if this goes ahead (and when might it be operational?), the price problem remains, something the Finkel report saw fit to point out, warning that the benefits of supply security need to be weighed against consumer costs.

All of which brings us around to the prospect of some of the West’s LNG being shipped to Melbourne or Newcastle.

Analysts UBS painted a rather dark summary of the situation in an October review. “Key conclusions,” they said, “are: 1, the east coast will remain reliant on diverted Qld LNG supplies for at least the next five years (and most likely longer), as alternate gas supplies of any size are still a few years away; 2, (project) cost and distance of new supply from markets means that (new) development is unlikely to exert material downward pressure on east coast gas prices any time soon; 3, declining Victorian supplies mean that South Australia and New South Wales will become increasingly reliant on alternate sources; 4, the largest sources of potentially lower cost supplies (NSW, Northern Territory shale) face regulatory issues; 5, there is room for LNG imports, but landed price is a key challenge; and 6, the elephant in the room is the Gippsland Basin JV – just how much additional gas is it able to bring to the market and at what price?”

APPEA’s Roberts acknowledges that “west coast gas is likely to be an expensive solution to east coast supply concerns,” urging political acceptance that “the reality is local gas will always be cheaper gas.” It is, he adds, “incredible” that Victoria and NSW, home to the biggest problems, are determined to rely on other States to save them.

Of course it’s incredible but, as you may have noticed, the incredible is becoming normal in our politics across a wider spectrum than the “energy crisis.”

It’s hard to go past Dickens in our present state. Remember? “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity” etcetera.

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