The role of natural gas in Australia

Australia has abundant supplies of natural gas, both offshore and onshore, enough for more than 50 years, based on current production. It is Australia’s third largest energy resource, after coal and uranium, and it is a crucial part of Australia’s energy mix, providing a quarter of the nation’s needs. It is also an essential feedstock for a wide range of industries and is the key to attaining the consistent high temperatures required in many sectors of the manufacturing and waste disposal industries.

Outside the transport sector, natural gas is the largest provider of energy (total final consumption) in Australia, providing 911 petajoules in 2016-17, which was more than the 820 petajoules provided by electricity. Natural gas’s share of the Australian energy mix is continuing to rise. Oil, which is mostly used in the transport sector, is the largest provider of energy in Australia with 2125 petajoules consumed in 2016-17.

Generating electricity
Gas-fired power generators can be ramped up and ramped down more quickly than coal-fired generators which makes them ideal for meeting peak demand as well as for providing baseload power. The facilities required for these generators use less land than that required for a coal-fired power plant of a similar energy output and they need less time for construction. Carbon emissions from gas-fired power generation are about 50 to 60 per cent lower than from coal-fired power.

In 2016-17, gas-fired generators provided 50,459 GWh of electricity in Australia. The amount of electricity provided by gas-fired generation has plateaued in recent years. Around 20 per cent of Australia’s electricity was generated by natural gas in 2016-17. Natural gas is used to generate electricity in all States in Australia, and it produces most of the electricity to meet peak demand.

Use in households
Natural gas provides almost as much energy as electricity to Australian homes. In 2016-17, natural gas and liquefied petroleum gas provided households with 181 petajoules of energy. For the same period, households used 213 petajoules of electricity. More than 100,000 kilometres of transmission and distribution pipelines deliver natural gas safely and reliably to homes around the country which use the gas for heating their houses, their hot water and for cooking.

Providing energy in the region
Natural gas from Australia is exported to many countries in the region, mainly Japan (the largest importer of Australian gas), China, and South Korea, but also to Taiwan, Malaysia, India and other places via spot markets in the region. In 2016-17, Australia exported over 52 million tonnes of liquefied natural gas (LNG), more than double the 25 million tonnes exported two years earlier (2014-15). Australia is the second largest LNG exporter in the world, second only to Qatar, and is on track to become the world's largest exporter as additional LNG plant capacity comes on stream.

LNG can be made from natural gas from either conventional sources or from coal seam gas. The gas is cooled to minus 161°C so that it becomes a liquid and in that form it is neither flammable nor explosive. This reduces its volume more than 600 times, making it easier to transport in specially-built tankers. It is delivered to LNG receiving terminals where it is turned back into gas for transmission and distribution.

Natural gas from unconventional sources
The natural gas that comes from conventional and unconventional sources is the same gas — it’s just the extraction methods that differ. Until recently, natural gas in Australia has mostly been extracted from fairly permeable sandstone which means it is less difficult to produce. Over the past 20 years, gas from other sources has been increasing its share of gas used in Australia. For example, coal seam gas (CSG) makes up around 30 per cent of the gas used in eastern Australia and up to 70 per cent of the gas used in Queensland.

There are three types of gas in Australia which require more sophisticated methods of extraction so are considered unconventional: CSG, shale gas and tight gas – from tight sandstones. CSG collects in underground coal seams and is trapped in fractures of the seams up to a kilometre below the surface by the pressure of the earth or water around it. Shale gas is trapped in the fine grained sedimentary rock of shale formations while tight gas is usually found at depths greater than 1000 metres in sandstone that has low permeability. Advances in extraction technology mean that gas in unconventional sources has become more economical to bring out of the ground.

Concern over the technology used to extract gas from unconventional sources has prompted governments in Australia to hold independent inquiries. These have all found that the risks can be managed provided there is a robust regulatory environment, that a rigorous monitoring program is put in place, and that high quality engineering
and technology practices are employed. This is no different from the requirements demanded of many other industries operating in Australia today.

Bibliography
Energy in Australia 2015, Office of the Chief Economist, Department of Industry and Science
Australian Energy Update 2018, Office of the Chief Economist, Department of Industry and Science
Energy Resource Information Centre
Santos

Gas markets

The East Coast market has some facilitated wholesale gas markets which enable large customers to buy gas without a long-term contract so they can meet short-term fluctuations in their demand, balance gas load and increase flexibility in their operations.

Three gas regions
The locations of gas fields and pipelines in Australia means there are three distinct gas regions: the East Coast which includes Queensland, NSW, the ACT, Victoria, Tasmania and South Australia; the Western region which includes Western Australia; and the northern region which includes the Northern Territory. All three regions sell gas to domestic and international customers. The East Coast gas region is an interconnected market with pipelines joining the five States and the ACT. The recently completed Northern Gas Pipeline has now also joined the Northern region to the East Coast market near Mount Isa.

East Coast facilitated markets
In 2014, a new model wholesale market was introduced in Wallumbilla, Queensland, where participants voluntarily trade gas either on a spot basis or a forward-dated basis.  Wallumbilla, west of Brisbane, is a major transit point between Queensland and the gas markets on Australia’s east coast and gas can be shipped from there to Brisbane and Gladstone or south to other parts of the East Coast market.

The Australian Energy Markets Operator (AEMO) operates the short-term markets in Adelaide, Sydney and Brisbane and the Declared Wholesale Gas Market in Victoria. The purpose of these wholesale markets, more properly known as facilitated markets, is to provide balancing mechanisms to increase options for trading in gas for those who do not have a long-term contract, or have spare capacity, or have a short-term need for more gas.

In 2016, Moomba Gas Supply Hub opened. The Moomba Hub uses the same trading platform, settlement systems, and operates within the same regulatory framework as Wallumbilla. The introduction of the second hub was aimed at increasing opportunities to trade between the southern markets and the liquefied natural gas export market in Queensland, and to encourage new participants, including smaller producers, large users and retailers.

Transmission pipeline market frameworks

Moomba expansion. Thanks to APA Group for the image.

There are two methods used to sell pipeline capacity: contract carriage and market carriage. Under contract carriage, a pipeline owner and a gas shipper negotiate a contract, usually for ten years or more, guaranteeing access to pipeline capacity.

This system has been in operation in Australia for decades and the long-term stability it provides for both parties has enabled the significant investments required for such large-scale infrastructure.

Shippers with long-term contracts are entitled to what is known as firm capacity, which guarantees that shipper transmission rights and priority in the pipeline, 365 days a year. The shipper is required to nominate how much of their guaranteed capacity they will use each day. If a shipper does not use all of their contracted capacity, they are free to seek out other shippers to sell that spare capacity to on the secondary market.

Pipeline operators can also offer for sale spare capacity. This capacity will be offered on an ‘as available’ basis and can be disrupted or delayed at relatively short notice.

Under the market carriage system, which operates only in the Declared Wholesale Gas Market Victoria, a shipper is not required to enter a pipeline capacity contract. In this market, facilitated by the Australian Energy Markets Operator (AEMO), a participant’s daily gas flow is determined by its bids into the wholesale gas market. The bids are despatched according to price and pipeline charges are based on the actual gas flows. The market carriage system in the Declared Wholesale Gas Market Victoria is similar to the transportation frameworks for gas distribution systems which are characterised by a very large number of users

Bi-directional flowsAnother recent innovation is investment in bi-directional pipelines. Traditionally, long transmission pipelines have linked remote gas production basins with a demand centre such as a manufacturer or city. In recent years, there has been a proliferation of linkages between major pipeline networks and these now provide pipeline operators with the ability to direct gas flows in response to regional shortages or abundances.

Bibliography
Australian Energy Regulator, State of the Energy Market Report 2015.
Australian Energy Markets Commission, Energy markets overview
Australian Energy Markets Operator, Gas market operations

Gas use in industry

Natural gas is used in all sectors of Australian industry, in particular in the chemical, rubber, paper, metal, milk, plastics and vehicle industries. Gas is used as a feedstock because of its chemical properties or because it can cheaply and rapidly heat to very high temperatures.

Natural gas is made up of two main gases, methane and ethane, but there are a number of other useful gases including propane and butane. Products manufactured with different combinations of the chemicals in gas include soap and cosmetics, household detergents, car components and pharmaceuticals.

Chemicals made from natural gas

Methane from natural gas is made into methanol and this is mixed with other chemicals to make four main chemicals: ammonium nitrate, sodium cyanide, methanol and peroxide.

ChemicalProducts and uses
ammonium nitratefertilisers, refrigerants, explosives, soft drinks and medical applications
sodium cyanidegold extraction and processing
methanolbuilding products, paints and resins, pigments and dyes,  carpeting, adhesives, agricultural chemicals, biodiesel and agents for the treatment of sewage and waste water
peroxidecleaning products, paper pulp, mining and food and textile manufacturing

 

Ethane is made into polyethylene and ethylene oxide which are components of a variety of everyday items.

ChemicalProducts and uses
 

Polyethylene

 

 

bags and films for food storage, retailing and wrapping
agricultural and irrigation piping, water tanks
films and wrapping for animal fodder and grain storage
rigid containers for food storage
industrial reticulation applications in mining and gas production and the commercial use of water
gathering lines in the unconventional gas sector
Ethylene oxidepolyols for foam insulation for appliances such as  refrigerators and freezers, shoe soles, adhesives, automotive applications, textiles, bedding and furniture.
glycol for antifreeze, resins and polyester fibre
surface wetters for agricultural applications

Natural gas has no real alternative as a feedstock in making the chemicals that are used in the industries described above. They often require gas to be supplied continuously for efficient production processes.

High temperature uses of gas

Natural gas can heat rapidly and efficiently and it has low emissions compared to other hydrocarbon fuels and grid electricity. That makes it the fuel of choice for industrial  applications requiring high temperatures or high-pressure steam.

One key application is in the high-temperature furnaces required to hygienically dispose of medical waste and associated biohazards. These furnaces require consistent and reliable delivery of high  temperatures and this is achieved by using gas.

 

Consistent high temperatures are also required in the commercial production of bricks in Australia. Alternative energy sources to heat brick-baking kilns can be problematic – for example coal  quality varies and this results in inconsistent heating and it is much more expensive to use electricity to achieve  consistent very high temperatures.

Other industries using gas to manufacture products include those making cement, pulp and paper, glass, and food and beverages, and those involved in refining alumina and non-ferrous metals. These include almost every product used in construction – windows, plasterboard, aluminium frames, fencing and screens, concrete and more.

On-site electricity generation

Industries that are remote from the electricity grid, such as mining, often use gas for on-site electricity generation. Natural gas can be delivered to the site via a transmission pipeline. Using gas often replaces more expensive diesel fuel which has higher carbon emissions and usually has to be transported by road, increasing pollution and the risk of accidents.

Other uses

Compressed natural gas (CNG) is natural gas that has been compressed for use in vehicles. In Australia, CNG is often used in city and suburban bus fleets and some intercity heavy road transport uses it as well. CNG has a number of safety advantages over petrol: it burns efficiently and has lower emissions and it can be retro-fitted to existing vehicles. As the refuelling network grows, the use of CNG is expected to increase. One key expected use of CNG is at remote sites, such as mines, that already have a gas supply. Such use would eliminate the need to transport diesel across vast distances.

The gas journey

 

Natural gas was formed hundreds of millions of years ago from decomposing microrganisms, plants and animals that were gradually covered by sand, sediment and rock. As it slowly compressed, it was exposed to increasing temperatures which caused its molecules to break down thus producing methane, which is carbon and hydrogen, and is the major component of natural gas. Large volumes of gas can be trapped in the rock in sedimentary basins which are usually composed of porous sandstone capped by impermeable rock. Australia has a number of large areas where gas is found, both onshore, such as in the Cooper Basin in central Australia, and offshore such as the Gippsland Basin off Victoria and the North-west Shelf off Western Australia. Natural gas is also found in shale, coal seams and tight sand. Gas found in these rocks is usually referred to as unconventional gas because the methods used to extract it are different to those used when the gas is in sandstone.

Once exploration has revealed the likely presence of gas, a well is drilled through the earth and rock to reach the basin. If the gas is in sandstone, the well is often drilled vertically. Wells to extract gas held in shale or tight sand require horizontal drilling as well, and gas in coal seams may be extracted by hydraulic fracturing of the rock, but this is becoming less common in Australia. Wells are cased with steel pipes to ensure a single pathway for the gas to come to the surface. The gas is released via a tube inserted into the well casing and flow is regulated by valves and fittings on the surface. This assembly is connected to holding tanks where any water is removed from the gas. The gas is then sent to a processing facility—in Australia, the processing facility is often nearby, collecting gas and oil from all the wells in the field. For instance, around 5600km of pipelines and flowlines carry gas from around 700 gas wells and 360 oil wells to the processing facility in Moomba in South Australia’s Cooper Basin.

Gas processing facilities

The natural gas used in Australian homes is almost entirely composed of methane, but the gas that comes out of the well also contains some other compounds and these are separated out in the processing facility.

Gas is often found with oil or mixed in with condensate, and if so, these two components are removed first, often by using the force of gravity in an enclosed tank to separate the light gas from the heavier oil and condensates. The oil and condensates are also valuable and these are sent for further processing. The gas that has been separated typically contains other hydrocarbons, such as propane and butane, which are also separated out. For instance, the Moomba processing facility removes the ethane from natural gas and sends it via a dedicated 1160km pipeline to the ethylene plant at Botany in Sydney where it is used as a feedstock in the manufacture of polyethylene.

After the other compounds have been removed from it, the natural gas is ready for transport to large consumers of gas such as energy companies, or manufacturing industry that uses gas as a feedstock or for manufacturing processes such as high-temperature firing of building products.

Gas transmission pipelines

Australia’s 38,000km of gas transmission pipelines carry all of the natural gas used in Australia. These pipelines form a major network on the east coast (SA, Queensland, NSW, Victoria and Tasmania) and cover vast distances in Western Australia and the Northern Territory.

Transmission pipelines often have a wider diameter than gathering (pipelines in the field) or distribution (pipelines in cities) pipelines — typically 300mm or more – and in Australia they are made of steel. The gas is pressurised for transport, usually from 10,000 kilopascals to 15,000 kilopascals or almost 150 times greater than atmospheric pressure at sea level. The pressure is maintained by using compressor stations along the route of the transmission pipeline. Transmission pipelines in Australia are buried underground to increase safety.

Gas distribution

Some transmission pipelines deliver directly to end users such as manufacturing facilities or electricity generators and others deliver the gas to an energy distribution company which supplies gas to retail customers including businesses and households. The gas from the transmission pipeline is depressurised before it enters the distribution system which uses a lower pressure throughout the system. In a large city like Sydney or Melbourne, the natural gas distribution system could be made up of thousands of kilometres of pipelines criss-crossing the city underground.

Exporting gas

Natural gas can be converted to liquefied natural gas (LNG) and this is the process used when gas is exported. Transmission pipelines carry the gas to an LNG facility where it is cooled to minus 161 degrees Celsius, a process which also reduces its volume by about 600 times. It can then be loaded into LNG tanker ships and sent overseas. It is delivered to a regasification facility where it is heated so that it is returned to a gaseous state and can be distributed.

Further reading:
Resources and Energy NSW
APLNG
Natural Gas.org
Energy Resources Information Centre
Santos

The unconventional extraction of gas

Natural gas is mostly methane, although other gases such as ethane can also be present in small

amounts. Natural gas formed hundreds of millions of years ago when organic material decayed and was compressed as it was covered by sand, sediment and  rock. Until recently, much of the natural gas extracted in Australia came from underground basins where the gas was contained in porous sandstone and trapped there by an impermeable rock cap. It has been conventionally extracted by drilling a hole through the rock and inserting a well via which the gas comes to the surface. However, natural gas can also be trapped in coal seams, in shale and in tight sands and these all require slightly different methods, unconventional techniques, to be used to extract the gas.

Coal seam gas

Natural gas can also be trapped in coal that lies in seams hundreds of metres below the Earth’s surface. This natural gas is part of the supply used in homes on the east coast of Australia and has been since commercial production began in Queensland in 1996. Australia’s major resources of coal seam gas are in Queensland’s Bowen and Surat basins, while NSW has reserves in the Gunnedah, Gloucester and Sydney basins, and on the NSW-Queensland border in the Clarence-Moreton Basin.

The gas is extracted by a range of methods including vertical drilling, horizontal or directional drilling and hydraulic fracturing. Hydraulic fracturing, or fracking, is used when it is the most efficient method to stimulate or improve the flow of gas from formations that are difficult to access due to depth and rock composition. A review by the Independent Expert Scientific Committee on Coal Seam Gas and Large Coal Mining Development found that of the 1844 coal seam gas wells drilled in Australia over 15 months during 2012 and 2013, six per cent were subject to hydraulic fracturing.

Tight gas and shale gas

Tight gas and shale gas are also types of natural gas, the difference is that more complex technology is required to extract them. Tight gas is found in rock of low porosity with few fractures, and this means that both horizontal or directional drilling and hydraulic fracturing may be required to  extract it. As yet, Australia has no commercial operations extracting tight gas which has been found onshore in Western Australia, South Australia and Victoria.

Shale gas is found in sedimentary rock of low permeability, usually between 1000 and 2000 metres underground. Australia is believed to have significant shale gas resources in the Cooper Basin in South Australia and Queensland; the Maryborough Basin in Queensland; the Perth and Canning basins in Western Australia; and the Georgina Basin and Beetaloo Basin in the Northern Territory, but they are yet to be fully assessed. Some gas is produced from shale in South Australia’s Cooper Basin.

Hydraulic fracturing

With hydraulic fracturing, fractures in the rock are created or increased to enable the gas to escape. In Australia, this is mostly done by injecting water and sand into the coal seams. The fluid also often contains a gelling agent to help the sand stay in the seams. Benzene, toluene, ethyl-benzene and xylenes (BTEX chemicals) are banned from use in hydraulic fracturing in New South Wales and Queensland, the two States where CSG activities occur, and all chemicals used by operators are approved by State regulators (including volume, concentration and potential toxicity) before fracturing begins. Coal seams also often contain a considerable amount of water, so hydraulic fracturing means that more water is recovered than is used as the gas and water is extracted from the well. In Queensland where most CSG extraction occurs, this water is treated if required to remove any additional minerals and salts that may be present and then the water can be used for a beneficial purpose, including for irrigation.

Fugitive emissions
Fugitive emissions is the name given to gas that is unintentionally released during gas exploration and extraction operations. Legislation requires that any fugitive emissions from the gas industry are reported to the Department of the Environment and the Clean Energy Regulator. Fugitive emissions total around seven per cent of all Australia’s emissions, and the gas industry accounts for less than a third of all fugitive emissions – most come from coal extraction and production. While more research into fugitive emissions from coal seam gas production is required, a pilot study undertaken by CSIRO in 2014 which measured emissions at 43 CSG wells in Queensland and New South Wales found that overall, emission rates were very low. The study examined well pads only; future studies will examine emissions from other parts of the production cycle.

Fugitive emissions may rise through the ground and disperse in the air or through water such as in rivers or ponds. This type of emission can occur naturally, and has been observed over centuries. Queensland’s Gasfields Commission has compiled a list of historical natural gas seeps that occur around the Bowen, Surat, Galilee, Georgina, Eromanga and Cooper basins, their location and the volume of the seepage.

Safe extraction

Extraction of natural gas by unconventional means has been extensively investigated, both in Australia and overseas, in a significant number of independent studies. Some of the important inquiries in Australia have been undertaken by the  NSW Chief Scientist and Engineer, the Independent Expert Scientific Committee on Coal Seam Gas and Large Coal Mining Development and the Australian  Council of Learned Academies. Overwhelmingly, the inquiries both in Australia and overseas, have found that the risks of extracting gas using unconventional means can be managed though appropriate industry land use regulation, high standards of professionalism and engineering, comprehensive data collection and monitoring, appropriate workforce training and application of new technology as it becomes available. This type of monitoring regime and regulation is applied to a range of industries that operate with risks in Australia, for example, the construction industry, the health sector and manufacturing industry.

Further reading:

Queensland Department of Natural Resources and Minerals
Commonwealth Department of the Environment
National Industrial Chemicals Notification and Assessment Scheme
CSIRO
NSW Chief Scientist and Engineer
Gas Industry Social and Environmental Research Alliance
Queensland Gas Fields Commissioner
APPEA’s Shale Gas Australia website