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Shell chief punctures myths surrounding gas exporters

 Business columnist, Melbourne: 10 Oct 2017

Shell Australia’s new chair, Zoe Yujnovich, has injected what for some will be an uncomfortable dose of reality into what has been a generally misleading debate about the role that the three big Queensland export LNG plants have played in the east coast energy crisis.

In an address to the national energy summit yesterday, Ms Yujnovich took issue with the widely accepted narrative that exports from the three plants off Gladstone have created a shortage of gas on the east coast and driven a spectacular surge in gas prices for households and manufacturers.

While there’s a strand of truth to that storyline — Santos entered contracts for the sale of LNG that weren’t completely supported by its domestic reserves — it is based on the false premise that had there been no export LNG plants built in Queensland gas would have been available, at a much lower price, to the domestic market.

In reality, if the Shell-owned QGC and Origin Energy and Santos-led consortia hadn’t invested more than $US60 billion to build those plants, it is unlikely the gas reserves that feed them would ever have been developed.

The feed for those plants is coal seam methane, which is more complex and more expensive to extract than conventional onshore gas. Without the massive investment in the plants and the long-term sales contracts to customers in the Asia Pacific region to underwrite it, those reserves may never have been economic because of the scale of expenditure required to exploit them.

Ms Yujnovich made the telling point that before Shell’s export plant (acquired when the group successfully took over BG Group) was sanctioned, QGC sold 20 petajoules of gas a year into the domestic market. Today domestic sales are running at about 100 petajoules a year.

Shell and PetroChina jointly own another coal seam gas entity, Arrow Energy, which currently supplies gas into the Queensland market. As Ms Yujnovich said, without the scale associated with LNG, Arrow hasn’t been able to justify the investment needed to fully exploit its resource base and therefore hasn’t meaningfully grown its production over the past decade.

In other words, those three LNG plants have made more gas available to the domestic market than would have been the case had they not been developed. FULL ARTICLE

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