Introduction

The growth in global demand for energy and efforts to mitigate greenhouse gas emissions are encouraging innovation, price and government policy action to change the energy supply mix. Recent and on-going innovations have dramatically expanded the technologically and economically feasible global resources of gas. These resources can play a significant role in mitigating global greenhouse gas emissions. If Australia is going to play its role in meeting global energy demand while assisting in mitigating climate change, it must ensure that all energy options are utilised, no matter how unconventional they may be.

The International Energy Agency (IEA) estimates that coal consumption will increase by 17 per cent between 2010 and 2020. However, secure, relatively cheap gas can act as an environmentally superior substitute as its carbon dioxide emissions in energy production are up to 45 per cent less than coal.

The most recent case of innovation transforming the global energy supply mix has been in technological advances that enhance the capability to extract natural gas from previously unviable sources. Geologists have been aware of the existence of oil and gas in geological formations such as shale and coal for decades.

The gas held in shale or coal formations, as well as tight gas, is generally referred to as unconventional gas resources. Techniques did not exist for the extraction of these resources on a widespread scale until the last few decades. Innovations, such as developments in hydraulic fracturing and directional drilling, have resulted in estimates of extractable US reserves in 2011 being almost seven times greater than reserves estimated in 2008, which were more than seven times higher than estimates made in 2002.

The US also provides evidence of the potential role gas can play in mitigating greenhouse gas emissions, where the availability of increasingly competitive gas has seen a major transition from coal to gas generated energy. This has been a major contributor to the seven per cent reduction in carbon dioxide emissions from the US economy over the past five years. Extracting shale gas has also had a significantly positive impact on the US economy, employing over 600,000 jobs in 2010, a number set to grow to nearly 870,000 by 2015, while contributing more than $118 billion to GDP.

The expansion of gas supply has transformed global energy security, with many countries potentially shifting from being net importers, to having major reserves of previously inaccessible energy. For instance, expansion in gas reserves could result in the US shifting from being a net energy importer to being an energy exporter, potentially rivalling Saudi Arabia by 2020. North America has already become a net energy exporter. The benefits of improved extraction technologies are not limited to the US, with potentially substantial deposits in countries that are traditionally net energy importers such as China or France.