Andrew Liveris, the Australian chairman and chief executive of Dow warns that Sydney could run out of gas by 2016 unless NSW and Victoria lift their moratorium on fracking.
Speaking on the sidelines of the Australia Davos Connection, Andrew Liveris said that the major eastern seaboard producers had overcommitted to gas exports and that in order to avert an energy crisis there was an urgent need to “liberate supply” by developing wells and building new pipelines.
Mr Liveris says that ample supplies of gas existed to meet domestic needs but that farmers and landholders would need to be direct financial beneficiaries of any production and community fears about fracking had to be resolved.
Under current law landowners do not own the right to mineral resources under the ground and instead receive a nominal access payment from companies extracting gas from their properties. This is in contrast to the United States where landowners receive royalties from any gas production. Since the widespread adoption of fracking techniques, US oil production has increased 58 per cent and natural-gas has risen 28 per cent, making the US one of the largest producers of both fuels in the world.
Mr Liveris believes that if the governments of NSW and Victoria lifted the moratorium on fracking and encouraged investment into pipelines to service regions with large gas reserves, Australia could not only prevent a gas supply crisis but would be able to greatly reduce the cost of energy and create thousands of jobs in upstream manufacturing.
“There are gas finds in the centre of Australia, there is gas in the west of NSW, there is gas in onshore Victoria. If you get all this gas into the market, supply and demand will rule,” Mr Liveris said. “Instead, not only are you going to run out of gas but you are also going to pay international prices.”
His comments come soon after a report by Deloitte that warned that Australia’s gas price could triple, an event that could strip as much as $160 billion from the economy and cause the loss of thousands of jobs in manufacturing, agriculture and mining. Currently, because the majority of the gas from new plants in Queensland will be exported it will be linked to the international OPEC-linked price, and Deloitte warned that gas prices for the eastern states could leap to between $8 and $10 per gigajoule by 2016. In the US by comparison, the market price hovers around $4-$5 a gigajoule.
Mr Liveris was at a loss to understand why environmentalists were so opposed to production of shale gas, given its beneficial impact on reducing greenhouse gas emissions. “If you are going to run out of gas, and you have to pay international prices for the alternative, then you have to burn more coal, then you are going to end up with a bad outcome for the country.”
He acknowledged that industry had failed to allay community fears over fracking. “I would actually ban the word,” he said. “It now evokes fear. You’ve got to organise a series of town hall meetings to actually explain what it means to get gas from these tight formations.”
If the community were to overcome its fear of fracking and production was to increase, Mr Liveris predicted that Australia would be able to create thousands of jobs and resolve what he feels is a critical issue of our time, rising youth unemployment.
“Everywhere I go it’s a topic,” he said. “Youth unemployment is the issue of our time and it keeps me up at night. Australia will have to diversify. What worries me about Australia is it’s a farm, a hotel and quarry. That’s not going to create enough jobs.”
“More and more I’m seeing countries behave like companies,” Mr Liveris said. “They’re looking at their competitive advantages. We hardly do any of that.”
Mr Liveris said that a growing gas sector could help Australia exploit those advantages.
“The Canadians extract the high value components and do high value add inside their economy. I’d do the same. For every dollar of gas you can make $20 of economic output. For every job in the gas industry, five jobs in the value add.” Mr Liveris said. “I would look at that policy very strongly.”
Correction: the article previously stated that all Australian gas was exported. It should have said all new gas is destined for export and that the impact would be on prices on the eastern states.