Federal Industry Minister Ian Macfarlane yesterday released the strategy to inform discussions with states which ultimately have the primary responsibility for onshore gas development, on ways to address “unnecessary barriers” to bringing on new gas supply.

The strategy release follows the Australian Energy Market Operator’s latest report on the east coast gas market which revealed it no longer forecasts a gas supply shortfall. And while this is usually considered good news, more sinister ramifications are lurking in the background.

It said a lot that the Energy Users Association of Australia welcomed Monday’s official announcement that the Australian Competition and Consumer Commission would start a 12-month inquiry into the competitiveness of wholesale gas prices.

EUAA CEO Phil Barresi said that under normal circumstances prediction on no gas shortage would be good news to energy users – “until one reads the reason for the change in forecast [that] gas demand has dropped due to a slow down and withdraw of manufacturing demand”

“Large gas energy users in the eastern states have long cried out for relief to their inability to secure reliable, affordable and long term gas contracts,” Barresi said. “The AEMO projections are not a cause for relief but for deep concern.”

The strategy maintains that Australia has gas resources capable of meeting both domestic and international consumers, yet acknowledges the fact that the east coast gas market is undergoing tremendous change driven by the CSG to LNG mega-projects going online in Gladstone.

The report attributed rising domestic gas prices to export price linkage; the decline of low-cost conventional gas reserves; the development of higher cost unconventional gas resources; and regulatory uncertainty regarding unconventional gas development.

Throwing the onus back on industry, however, the strategy document said: “The Australian government also expects industry to secure its own future by engaging meaningfully and proactively with the community to explain and share benefits, and by supporting appropriate action to understand and mitigate any environmental impacts of its activities.”

With CSG resources having now been commercialised with the first shipments from BG Group’s Queensland Curtis LNG project having set sail for Asian customers, the strategy states shale and tight gas resources as the next cab off the rank as the focus for onshore unconventional gas development.

While conducting its own research into these unconventional gas types, the federal government believes it can contribute to the development of unconventional gas resources by:

• Improving gas markets to enable better access and price discovery for all market participants including customers;
• Understanding and responding to potential social impacts to build confidence that community needs and expectations will be properly considered;
• Understanding and communicating the science to build confidence in the community that risks and environmental impacts can be managed;
• Attracting investment and encouraging steady and predictable supply through better regulation;
• Tailoring production technologies for Australia to ensure we are making the most of our resources;
• Establishing an oil, gas and energy resources industry growth centre to accelerate advancements within the industry;
• Improving access to geo-scientific precompetitive data to understand our resources and attract investment;
• Demonstrating the macroeconomic benefits to build community confidence; and
• Learning from mistakes and successes of other jurisdictions through sharing knowledge.

Australian Pipelines and Gas Association CEO Cheryl Cartwright said she believed the government was on the right track.

“By providing information to communities and other stakeholders about the benefits of gas and the safety and value of unconventional gas, the government will help to increase opportunities to supply gas for Australia’s domestic market,” Cartwright said.

“There have already been many scientific reports confirming that exploration and development of CSG, with appropriate safeguards and regulation, is safe and reliable.”

The NSW chief scientist’s Independent review of coal seam gas activities in NSW concluded last September that the technical challenges and risks posed by the CSG industry could, in general, be managed through a clear legislative framework and high engineering standards and professionalism from the gas extraction companies.

Then, more recently, Allen Hawke, the commissioner presiding over the hydraulic fracturing inquiry in the Northern Territory, said in his November 2014 report that the environmental risks associated with hydraulic fracturing could be managed effectively with a robust regulatory regime – a finding is consistent with other Australian and international inquiries.

“The government must not underestimate the challenge of overcoming an emotional, rather than logical, response to gas development and the need to provide communities with information about the science as well as an effective and appropriate regulatory regime,” Cartwright said.

“Also, industry must be ready to support the government’s efforts, participating in communication and engagement.”