This paper explores how regulations, governance arrangements, and industry practices for unconventional gas production may be enhanced in Australia based on the US experience.
Global primary energy consumption is expected to increase by 39 per cent over the 20 years to 2030. The vast majority of this expanded demand will continue to be met from fossil fuels. Natural gas accounts for 25 per cent of energy use in the United States, and 21 per cent of global total primary energy supply. Even though the production rate of traditional natural gas in the United States declined by 39 per cent from 1990 to 2009, unconventional natural gas has accelerated so that shale gas is expected to account for nearly half of total natural gas production in 2035. Recent advances in hydraulic fracturing (for example, combining horizontal drilling with hydraulic fracturing) have resulted in an average annual growth rate of nearly 50 per cent in shale gas production. Further advances in technology are likely to result in unconventional resources contributing a large share of future energy supplies.
The contribution of coal seam gas to Liquid Natural Gas (LNG) projects in Australia, the development of shale projects in North America, and the use of oil sands in Canada are three clear examples of how unconventional resources can change the energy landscape. Until recently, Canada and the United States were expected to develop dozens of LNG regasification projects to import gas for domestic needs. The high gas price resulting from market conditions, combined with the development of key technologies (especially horizontal drilling and hydraulic fracturing), has enabled huge shale gas reserves to be unlocked across North America. In the US, as much as 50 per cent of gas consumption is now sourced from unconventional deposits, for example shale gas, tight gas, and coal bed methane. These recent developments have resulted in a lowering of domestic gas prices and the creation of an opportunity to start exporting LNG. A critical issue is to sustain this production while managing sensitive environmental issues around its exploration and production.
The United States has an extended history of exploiting unconventional gas resources and a well-developed unconventional gas industry. As Australia develops its unconventional gas productions – particularly coal seam methane in Queensland and New South Wales – it can draw on the experience of the US and its policymakers, industry experts, and environmental regulators. The Canberra workshop, held on 1 March 2012, and an earlier meeting with state government officials in Brisbane, were designed to draw on the expertise of three invited participants in the regulation of the unconventional gas production industry in the US. The workshop’s aim was to look at the lessons that could be usefully applied and further developed in Australia. Contributions from Australian technical experts and Australian government departments and agencies provided a valuable Australian perspective. This summary document explores how regulations, governance arrangements, and industry practices may be enhanced in Australia based on the US experience.