The Australian Energy Operator has declared the state with the second-largest Australian gas reserves, Victoria, will run short of gas in 2028.
The development of Victoria’s immense low-cost onshore gas reserves which do not require fracking is blocked by concealment politics and poor local media.
The vast reserves in the ‘don’t look’ Gippsland area have been calculated by world-renowned US gas and oil reserve estimator MHA Petroleum Consultants, now part of the giant Sproule group. They were prepared in 2011 for Ignite Energy Resources, the then leaseholder.
Until recently, they were available on Victorian government websites, but have since been removed as part of the concealment process.
The reserves will require about six wells to be drilled to make sure gas will flow in line with the first test wells.
With that qualification, three forces stand between abundant low cost gas for Victoria and Australia and severe shortages:
• Former Victorian premier Daniel Andrews and his former deputy and now Premier Jacinta Allan. Andrews and Allan know development of a gas will cost the ALP inner city seats to the Greens, so have been desperate to conceal the existence of the gas.
When in 2015 an application was made to Andrews to develop the gas, he rejected it. He became so desperate to conceal the existence of the gas he spent $42m of taxpayer money enriching a carefully selected committee and giving them the task of discovering whether there was any likelihood of onshore gas in Victoria.
But Andrews meticulously blocked out the areas containing the massive gas reserves and gave the committee strict instructions to not — I repeat, not — look in the areas which contained the gas. The committee took the money and reported “no gas”.
• The Coalition Opposition. In 2014, when a consortium which included Exxon and BlueScope Steel, plus the then leaseholder, put a development plan to former premier Denis Napthine he rejected it, fearing somehow fracking would be involved and he would lose farm votes in Gippsland. He lost the 2014 election to Andrews.
The Victorian opposition has stayed away from asking the vital questions and must accept their share of the blame. If they have any interest in the state, the Victorian opposition should constantly demand the Premier table the MHA Petroleum Consultants report.
• The local media believe other issues are more important than Victoria’s looming shortage of gas, despite its immense reserves. I will leave others to comment on this failing.
Nevertheless, uncorrected misinformation coming out of the Victorian government has made farmers in Gippsland very concerned about the development of their gas.
Gippsland farmers don’t understand no fracking is required, because the gas is dissolved in extremely deep water — between 500 metres and 1200 metres — and well below the near-surface aquifers which supply farmers.
In the test wells the water came to the surface and the gas was easily separated, which makes production extremely low-cost, given it is next to the pipeline which connects it to Melbourne and the rest of eastern Australia.
The banned development included a substantial farmer income.
Credit for discovering the existence of the immense gas field goes to Exxon geologists in Houston, who studied the more than 20,000 wells drilled around the 1950s and earlier to map out brown coal reserves and look for oil. At the time, the gas was thought to have no value.
The unique Victorian gas does not increase carbon emissions in the same way as normal gas because the water produced as a co-product can be used to grow plants which store carbon in their roots.
In addition, any power plant based on the gas reserves would be a low-cost reliability backup for Victoria’s wind and solar facilities, making them more economic and enabling greater expansion subject networks.
In turn this would enable faster shutdowns of Yallourn’s brown coal power generation, which is one of the greatest polluters in Australia.
Gippsland not only becomes insulated from drought but the additional water can trigger an agricultural revolution to improve productivity and store carbon in the roots of plants.
And there is a fascinating side issue involving China.
In 2008, a giant Chinese state-owned conglomerate ChinaChem purchased the Qenos high density polyethylene plant in Altona, Victoria and the ex-Orica plastic plant in Botany, Sydney.
ChinaChem was developed by the Chinese entrepreneur Ren Jianxin, who was aware the Bass Strait gas reserves would start to run down in a decade or two, but he was also aware of the massive onshore reserves in Victoria.
Jianxin retired in 2018 and three years later his operation was absorbed by SinoChina, which is now looking at closing the Qenos operation, which is the base for an important segment of Australian and Victorian manufacturing.
SinoChina is part of the US/China trade curbs. This will be a big issue if Trump wins the US presidential election.
More Coverage
Consortium forming to make play for Brookfield’s Healthscope
Healthscope remains in the emergency room, but HMC Capital’s backer and industry groups want to offer the hospital provider a lifeline.
Deal done at Exchange Square as ASX heads for new home
A first joint venture by Proprium and PGIM Real Estate aims to transform the landmark building at Exchange Square as Australia’s sharemarket operator moves out.