Energy security fears spark oil and gas supply pledge
Australia’s biggest energy companies say they will ignore calls not to open up new oil and gas fields, describing a ‘frightening’ scarcity of new developments.
Australia’s biggest energy companies say they will ignore calls not to open up new oil and gas fields, describing a “frightening” scarcity of new developments as Russia’s Ukraine invasion sparks the worst global energy security crisis since the 1970s oil embargo.
While the International Energy Agency warned last year that no new oil or gas fields or coal mines should be opened up if the world is to reach net-zero emissions by 2050, Australia’s largest producers say it is vital to develop new sources of supply, with Santos concerned it has already missed opportunities.
“We are watching an energy crisis play out in Europe right now, but we have on our doorstop a prime example of what happens if the energy transition is focused only on stopping new oil and gas projects,” Santos chief executive Kevin Gallagher will tell the APPEA industry conference on Wednesday.
“We’ve had a decade of moratoriums, shutdowns and lockouts in resource-rich states and territories. And, as I have said for a number of years, the resulting scarcity of new developments today is frightening, with forecasts of tight supply over coming years.”
LNG has shot to all-time highs this year, while oil has surged 40 per cent after supplies were effectively shut off from Russia, sparking a battle across Europe and Asia to secure replacement volumes.
Woodside Petroleum said a crunch on supplies around the world had elevated energy security into a major issue for both the industry and consumers.
“I think Russia’s invasion of Ukraine really has catalysed the energy security conversation in a way that it’s not been done since the 1970s with the Arab oil embargo,” Woodside chief executive Meg O’Neill said.
“Nations and political leaders first and foremost think about their home patch before thinking about their role in the global world. And the short-term implication is that there are challenges on reliability and challenges on affordability.”
The scramble for supplies has reignited a debate over energy security and emboldened producers to agitate for opening up new oil and gas fields, despite rising pressure from investors to set more ambitious climate change goals.
A push by activists to exclude fossil fuels was misguided and would simply push supply to rival nations with less stringent pollution goals, said the Australian Petroleum Production and Exploration Association, the industry body that counts Woodside, Shell, Santos, BP and BHP among its members.
“The focus of our opponents on stopping fossil fuel projects has had no effect on consumer demand, and no effect on emissions reduction. What it has done is to push fossil fuel developments to places such as the Middle East and Russia,” APPEA chairman Ian Davies said.
“This has created a supply crunch and has raised prices, hurting people and economies around the globe.”
Chevron, which operates the giant Gorgon and Wheatstone LNG projects in Western Australia, tipped ongoing price and supply volatility.
“There are going to be disruptive forces that move the markets around and energy supply around. Given these types of challenges, we can help to solve the types of problems that we‘re seeing, but there will still be some bumpiness as we make the twists and turns,” Chevron Australia director of operations Kory Judd said.
ExxonMobil Australia said the industry was used to geopolitical ructions and the best way for it to respond was by ensuring sufficient supply in the market.
“We’re putting a lot of focus now on Russia but in the past it could have been Venezuela, it could have been Iran, it could have been Libya. So there are always geopolitical events affecting overall supply and demand dynamics. In many instances we see those reflected in price and supply issues,” ExxonMobil Australia chairman Dylan Pugh said. “It goes back to some of those fundamental principles about continuing to bring on investments and making sure that you have a market that’s not so fragile.”
Chevron also took a swipe at iron ore producer Fortescue Metals after its chairman Andrew Forrest attacked the oil and gas industry for relying on carbon capture schemes to cut emissions.
Dr Forrest slammed carbon capture as unreliable and questioned whether a mass rollout of the technology was going to solve the industry’s pollution problems.
Chevron said its $2.5bn Gorgon carbon capture and storage project under WA’s Barrow Island, which is still only operating at half capacity, was storing the equivalent of Fortescue’s annual pollution each year.
“We’ve injected 6 million tonnes of carbon dioxide since 2019 and 2.1 million tonnes last year, and that’s about equivalent to the emissions a company like FMG emits in a year,” Mr Judd told the conference.
“I read all of the negativity around it but I see it happening reliably every day.”
Santos, which is developing several major carbon capture projects, was also set to criticise negativity around the technology.
“The new focus on stopping oil and gas projects in environmentally responsible jurisdictions such as Australia is centred around discrediting a proven technology for low-cost, large-scale emissions reduction – carbon capture and storage,” Mr Gallagher is expected to tell the conference on Wednesday.
“Yet CCS has been done before. We are doing it now in 27 commercial projects around the world. And it works.”
Gorgon, which started in 2019, is the largest carbon capture facility in the world but has been hit by technical setbacks and delays, underlining the huge task ahead for oil and gas producers who hope the nascent technology can help solve pollution concerns.
Santos says it can store 100 million tonnes of carbon dioxide in depleted oil and gas fields at Moomba in South Australia’s Far North, and is claiming a world first by “booking” the figure as part of its assets.
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