Now, Australia’s key export partners, like Japan, China and South Korea, are aiming to reduce their reliance on fossil fuels. Natural gas produces less carbon dioxide (CO2) emissions than coal. However, if methane leaks exceed three per cent, they wipe out any greenhouse gas advantages of switching from coal to gas. Despite this, Australia’s incumbent government is supportive of gas exports from Australia and is investing heavily in the industry’s domestic infrastructure. This risks leaving stranded assets as the world transitions away from dirty fossil fuels.
How much gas does Australia export?
From June 2020 to June 2021, gas exports from Australia totalled about 77.2 million tonnes. This was below the 79.5 million tonnes exported in the 2020 financial year. A decrease in demand as a result of the COVID-19 pandemic is largely the reason for this reduction.Other issues, such as disruptions to the Gorgon gas project in Western Australia, problems at the Wheatstone production and no production at all from Prelude FLNG, are also responsible.
Overall, 82 per cent of the gas Australia produces is tied to exports. Specifically, companies either export this gas or use it as fuel to run gas export terminals. The manufacturing industry uses a mere one per cent of its gas. These figures cast doubt on the advantages of a ‘gas fired recovery’ for Australia. Investment in the gas industry will not benefit everyday consumers or the manufacturing sector. On the contrary, gas producers and exporters themselves have the most to gain from this.
Who buys gas exports from Australia?
China currently receives the greatest proportion of gas exports from Australia. They overtook Japan as Australia’s number one LNG export destination in the 2020-2021 financial year. 29.8 million tonnes of LNG was sent to the east Asian country in that 12-month period. This represents 39 per cent of Australia’s total LNG exports.
Australia is China’s largest supplier of natural gas. However, this position is under threat due to a souring of diplomatic relations between the two countries. China has been officially and unofficially banning Australian imports since Australia ordered an investigation into the origin of COVID-19. For example, Beijing has been verbally instructing smaller LNG importers to stop buying Australian gas for the rest of 2021.
If relations continue to deteriorate, China could instead rely more heavily on the US, Qatar and Turkmenistan for its gas. Likewise, Russia and Indonesia have also been increasing spot trades to China in the past few years. The uncertain future of Australia’s gas exports makes the government’s recent investments in the natural gas industry appear short-sighted and potentially disastrous.
Historically, Japan has been the biggest market for gas exports from Australia. But, in the past year, their proportion fell from 38 per cent to 37 per cent of the LNG export volume. The country bought 28 million tonnes of gas from Australia in 2020-2021. This was 2.5 million tonnes below the imports of the 2019-2020 financial year.
Meanwhile, South Korea is Australia’s third-largest LNG export destination. Their imports of Australian natural gas reached eight million tonnes in the most recent financial year. This was slightly below that of the previous year, which reached 8.9 million tonnes.
However, it is likely that gas exports from Australia will increase to South Korea. The country has environmental plans to reduce its reliance on coal to cut its emissions. Currently, gas and renewables account for 26 per cent of their energy generation. They want to increase this to 50 per cent by 2030. Expanding renewable energy generation will undoubtedly cut emissions. But switching from coal to gas is no guarantee of emissions reductions.
Which countries compete with gas exports from Australia?
Qatar ranks third in the world for proven natural gas reserves. Almost 14 per cent of our planet’s natural gas deposits are located in the Middle Eastern country. Unsurprisingly, Qatar is a major exporter of both gas and oil. The country subsequently has the highest per-capita emissions on Earth. Yet, like Australia,Qatar is refusing to commit to absolute carbon cuts.
Russia is the world’s largest producer of crude oil and among the largest producers of natural gas. The majority of its fossil fuels go to Europe, including Turkey. For example, more than 75 per cent of their natural gas exports went to OECD Europe in 2016. Russia exports about 30 per cent of their total natural gas production. The remainder is kept for its domestic market to help keep prices down for consumers.
Why does Australia export so much natural gas?
Gas exports from Australia took off in 2015. In that year, gas companies began shipping liquefied natural gas (LNG) from Gladstone, Queensland. Prior to this, these companies were exporting LNG whenever they had spare capacity. Subsequently, they expanded their market by selling gas abroad in response to a global demand for LNG. Gas producers in the eastern states now export almost three-quarters of the gas they produce.
From 2011 to 2014, before gas exports from Australia took off, domestic gas prices averaged below AUD $4 per gigajoule in the eastern states. However, in 2017, they soared to AUD $20 per gigajoule. By the end of 2019, the cost reduced for domestic gas users. But it continued to fluctuate between AUD $8 and $11 per gigajoule.
At the same time, LNG exporters were selling gas abroad for under AUD $6 per gigajoule. The Australian Competition and Consumer Commission (ACCC) has expressed concerns about the disparity between domestic and export prices. Domestic prices rose because gas companies agreed to provide certain amounts of gas to different overseas markets under long-term contracts. But this has had a knock-on effect on the domestic market. Now, if an Australian gasfield produces less than enough gas to meet contractual obligations, the company sells gas that would have otherwise been available for the domestic market.
Nevertheless, high gas exports in Australia do not necessarily correlate with higher domestic prices. Western Australia is a case in point. The state has been developing several significant LNG export projects over the past five years. Yet, gas prices for homes and businesses since 2015 remain at about half the levels of the east coast.
Western Australia has kept its gas prices low through its domestic gas reservation policy. The regulation ensures gas producers keep 15 per cent of their gas available for the domestic market. This breaks the connection with gas export prices. It is the reason why Western Australians were paying roughly AUD $3 per gigajoule in 2019, a fraction of the price on the east coast.
Effects of natural gas
Natural gas from deposits consists of 70 to 90 per cent methane. But, the processed gas that ends up in businesses and homes is more like 85 to 95 per cent methane. Methane is an extremely potent greenhouse gas. It traps, on average, 86 times as much heat in the atmosphere as CO2 does over a 20 year period. Over a century, methane has 28 times the global warming potential of CO2.
A significant environmental problem with using natural gas is the amount of methane that leaks. These fugitive emissions occur at every stage of its use. Most emissions occur during production, estimated at 37 per cent of the total. However, throughout the process, from gathering and transmission to processing and distribution, methane is escaping into the atmosphere.
Moreover, using natural gas in your home can have adverse health effects. Studies show that appliances, such as gas cooktops, can cause asthma in children. In Australia, natural gas is responsible for up to 12 per cent of all childhood asthma cases.
The health repercussions for a child growing up in a house with a gas stove are comparable to living with a smoker. There are even links between using gas for cooking and increasing the likelihood of dying from COVID-19. Using a gas stove in an area with poor ventilation results in air pollution, such as fine particulate matter. If this is inhaled, it can lead to severe health risks.