AIE
Australian Institute o f Energy

Leadership in Energy

Interesting and useful articles

THE FUTURE OF HYDROGEN, SEIZING TODAY'S OPPORTUNITIES
EXECUTIVE SUMMARY AND RECOMMENDATIONS 

Report prepared by the IEA for the G20 Japan, June 2019 

Hydrogen seems to have become the flavour of the month. However, with Australia having among the world's highest electricity and natural gas prices, the critical inputs for the two processes used to manufacture hydrogen, it would seem hard to imagine that Australia could ever produce hydrogen globally at competitive prices. 

The preparation by the IEA of this rigorous Report for the forthcoming meeting of the G20 is therefore timely and a useful contribution to the debate. However, it is not clear wheher the full report can be attached to this note, though it is available from the IEA's website. The Executive Summary and Recommendations are free.

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vehicle co2 emissions legislation in australia - a brief history in an international context

Robin Smit, TER (Transport Energy/Emission Research Pty Ltd) 26 May 2019

This paper addresses the questions "What has Australia achieved in this space in the last 20 years, and how does it compare to international best practice?"

Road transport contributed to 21% of total CO2 emissions in 2016 in Australia. Mandatory CO2 standards are internationally recognised as one of the most cost effective strategies to reduce transport emissions. In order to drive reductions in the growth of greenhouse gas emissions, fuel efficiency and/or CO2 vehicle emission standards have been adopted in some 70% of the global light vehicle market. Australia is not among them. 

This paper concludes that the on-road CO2 emissions rates of new cards in Australia are actually increasing over 2010-2025, are much higher than reported using the official emissions test and that this gap with the official test is expected to grow 65% by 2025.

Australia is increasingly lagging behind international best practice.

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Liquid Fuel Security Review- Interim Report

Commonwealth of Australia ,2019

This interim report presents the government’s understanding of how the liquid fuel supply chain operates and highlights areas of risk.

There are now three major pieces of other work under way. The Department of the Environment and Energy is developing a model of the fuel market and its supply chains. The model captures shipping, refinery production and the distribution network. The fuel supply chain is assessed for vulnerabilities by reviewing disruptions that have already occurred as well as testing hypothetical supply scenarios. It then will consider how the emergence of other forms of transport may influence liquid fuel use.

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SHAPING IRAQ’S OIL AND GAS FUTURE

Ellen Scholl, Deputy Director Atlantic Council‘s Global Energy Center, January 2018.

Iraq’s oil and gas potential remains considerable, albeit subject to the challenges faced by the Iraqi government in Baghdad and by the KRG in Erbil. Current oil production is limited by OPEC to 4.35 million  b/d though production forecasts are in the range of 5-6 million b/d. More interesting is its natural gas production potential as flaring is reduced from production of crude oil, some 2.5 bcf and sufficient to meet Iraq’s domestic requirements. Currently Iraq holds the world’s fifth largest proven oil reserves amounting to nearly 10% of the global total and 20% of proven oil reserves in the Middle East.

In addition to removing the obstacles to increased production and export growth, the biggest challenge remains the management of the resulting revenue in a way which serves the country’s long term development interests and improves the standard of living of all Iraqis.

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 OIL AND GAS, A ROADMAP FOR UNLOCKING FUTURE GROWTH AND OPPORTUNITIES FOR AUSTRALIA

CSIRO Futures, October 2017 

This Oil and Gas Roadmap provides a guide to addressing some of the challenges faced by the oil and gas industry in Australia today. These comprise enhanced basin recovery, advanced environmental solutions and processes, digital operations and maintenance  and high value diversification. In order to unlock these opportunities, new business ecosystems must be created.

The report is based on the opinions of executives and managers from oil and gas operations, service companies and Government  agencies and represents a consensus view of the trajectory of the industry developed by a synthesis of executive opinions, technical expertise and scientific research.

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Japan's Oil and LNG Price Evolution on the Path To Transparency - Oil and LNG special report with foreword by the Institute of Energy Economics, Japan.

S&P Global Platts, Takeo Kumagai, Eriko Amaha, Jonty Rushforth and Shelley Kerr, September

Japan's oil industry feels that it is time to establish transparent pricing mechanisms as it faces a future of declining domestic demand and a restructuring of the refining sector. This has also affected LNG. In , the spot and short term LNG imports into Japan already accounted for % .The global LNG market is forecast to have a surplus manufacturing capacity of some  million mt by , leading to severe price competition.

This has implications for the Australian LNG industry in terms of lower revenue (volume and price) and the domestic gas market (lower prices despite the embargo on onshore exploration for gas in NSW and Victoria).

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Adjustment in the Oil Market: Structural, Cyclical or Both?

Bassam Fatouh, The Oxford Institute for Energy Studies, May

The assumptions made about crude oil price movements determine the prospects for the Oil & Gas and LNG industries. The rapid fall in oil prices has divided the analysts as to the nature of this latest price cycle. There is now a high degree of uncertainty in the market, which raises some important questions: has there been a structural shift in the adjustment mechanism, is the cycle different this time and, if different, how? Clearly we have a supply/demand imbalance exacerbated by high stocks ,though there are other factors too. For example: the balancing role now played by US shale oil, new players in the business model, lack of OPEC cohesion, rebalancing of the Chinese economy and the changing nature of the geopolitical risk.

This excellent article sheds new light on the problem and is a useful contribution to an informed debate of this subject.

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Examining Barriers to More Efficient Gas Markets

Productivity Commission Research Paper, March

With the commencement of exports of LNG from Gladstone, the eastern Australian gas market will undergo profound changes brought about by higher gas prices, new unconventional sources of supply and a significant disruption to the market. New opportunities will be presented to earn a higher return from non-renewable resources which will result in a net benefit for the community. However, consideration must be given how gas exploration and production rights are to be allocated in an optimal manner. Community concerns about the environmental and health risks of coal seam gas (CSG) need to be addressed better and the expected benefits of CSG moratoria in NSW and Victoria must be weighted against their expected costs for gas users and governments.

This Report should be essential reading for all in the gas industry.

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Oil and Gas Industry Cost Trends

An independent report prepared by EnergyQuest for the Australian Petroleum Production & Exploration

There is probably no industry more driven by economics than the oil & gas industry. This excellent report puts in context cost trends since , in Australia and overseas and their implications. As the oil and gas industry is a global industry, costs reflect global as well as local developments, as well as the changing price of crude oil. Global Finding & Development costs for new reserves have increased six-fold, upstream costs have more than doubled and operating costs nearly doubled. There is no comprehensive time series of Australian industry costs, however, it was possible to deduce general trends. Australian CSG projects are now at the very top of the cost curve.

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Light Vehicle Emissions Standards for Australia , Research Reports

Climate Change Authority, June

Following the announcement of the closure of the three Australian vehicle manufacturers, one perceived barrier to the improvement of fuel efficiency by regulation of the vehicles sold in Australia has now been removed. The objective of these proposals by the Climate Change Authority (and also noted in the recent government's Energy Green Paper ) is to align Australia with the targets already introduced in the United States, though still lag those of the European Union . Australia is behind many developed countries in the efficiency of its light vehicle fleet.

This standard would start in  -. Mandatory fleet fuel efficiency standards had been successfully introduced in the mid 's as a means of reducing fuel consumption, but that momentum was subsequently lost. This proposal approaches the issue by reducing emissions of the various greenhouse gases in vehicle exhausts. The technologies to reduce fuel consumption and associated emissions are already available.

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Australia's Liquid Fuel Security, Part : A report for NRMA Motoring & Services

John Blackburn AO, February

"This second report recommends a comprehensive response to our growing import fuel dependency that considers a full range of plausible scenarios and assesses the contribution to be made by changes to both demand and supply sides of the liquid fuel delivery chain. It also "examines the feasibility of improving our liquid fuel security".

As such, it is an important contribution to an informed debate on this critical national strategic issue and a valuable input to the forthcoming White Paper on Energy.

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Gas Market Taskforce

Final Report & Recommendations and Supplementary Report, P. Reith - Chairman, October

The Gas Market Taskforce was established to provide policy options to the Victorian Government on improving the operation and efficiency of the eastern Australian gas market. It provides a snap shot of the issues facing the eastern gas market and the proposals for addressing these issues. As such, these reports are essential reading for all who are involved, one way or another, in this market.

The Government has invited feedback on its  recommendations.

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The Great Game for gas in the Caspian

Editor Peter Kiernan, Lead Analyst, Energy, The Economist Intelligence Unit

Whilst we may be fascinated by the rapid developments in the US in shale oil and gas and their impact on Australia's future gas exports, there are equally fascinating developments in the Great Game in Central Asia, now played by Russia, the EU, the US and China.

This report assesses the outlook for oil and gas in Azerbaijan, Kazakhstan and Turkmenistan and how shifting market dynamics have affected securing access to this gas. China's emerging role in the region's energy resources, the Eurozone crisis, the US shale gas boom and Russia's efforts to entrench its supply position in the European market, as well as declining production of gas in Europe, are the key drivers for this game. 

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Independence day: A special report on North America's oil and gas boom

The Economist Intelligence Unit,

Australia is facing competition for its growing LNG exports from North America and potentially East Africa, and for thermal coal from North America as gas replaces coal for power generation in the USA. This report is a collection of recent articles and provides context for the medium to longer term prospects for the Australian gas industry.

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Engineering Energy: Unconventional Gas Production

Cook, P, Beck, V, Brereton, D, Clark, R, Fisher, B, Kentish, S, Toomey, J, and Williams, J. A report for the Australian Council of Learned Academies, May,

Many sedimentary basins are prospective for shale gas and the undiscovered resource base is very large. However, whilst shale gas will not be a cheap gas, it has the potential to become an economically important additional energy source. The manner in which shale gas is produced has the potential to impact the landscape, ecosystems, surface and groundwater, the atmosphere, the communities and may even result in minor induced seismicity. These effects can be minimised where an effective regulatory system and best monitoring practices are in place and can be remediated where they do occur. It is matter of urgency that a transparent, adaptive and effective regulatory system is now in place and implemented.

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The Draft National Harmonised Regulatory Framework for Coal Seam Gas

Standing Council on Energy Resources,

The Framework is a guidance and reference tool for federal, state and territory regulators for the coal seam gas industry. Its purpose is to provide national and global leading practices to consider and implement in the assessment and ongoing regulation of proposed projects for exploration and production. This draft was recently discussed by all Energy Ministers but a communique of that discussion is not available.

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Fossil and Nuclear Fuels- the Supply Outlook, March

Werner Zittel, Jan Zerhusen, Martin Zerta and Nikolaus Arnold -Energy Watch Group/Ludwig-Boelkow-Foundation

In  the Energy Watch Group published a report on the future of the world oil supply, presenting a scenario of declining supply in the coming decades to .This  report updates those findings, as well as providing projections for gas, coal and uranium.

Crude oil supply entered a plateau around  and started to decline in . Recent shale oil/gas developments in the US have reduced its imports and may distort the overall view of the global industry's prospects for a decade. According to this study, coal and gas will reach their production peaks around .The combined peak of all fossil fuels will occur a few years earlier and will coincide with the beginning of the decline of oil production. This decline of oil production will lead to a rising energy gap which will become too large to be filled by natural gas and/or coal.

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Australia's Liquid Fuel Security: A Report for NRMA Motoring and Services

John Blackburn AO,  February

In the Draft Energy White Paper, , it was written that: " Australia must have a mature debate about our energy sector and implications of different decisions. This means there must be a deeper community engagement in energy policy issues and outcomes." This report is a contribution towards that engagement. It makes eight recommendations.

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Report on Australia's oil refinery industry

House of Representatives Standing Committee on Economics, January,

"Despite the changes over the last decade and recent closures, evidence to the committee suggests that going forward there is a role for the Australian oil refinery industry, with groups acknowledging that some domestic refining capacity is a worthwhile complement to imports as part of having reliable, mature and diverse supply chains for liquid fuels."

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An analysis of coal seam gas production and natural resource management in Australia.

Williams J., Stubbs T., and Milligan A. October . A report prepared for the Australian Council of Environmental Deans and Directors by John Williams Scientific Services Pty Ltd, Canberra, Australia.

There has been no greater influence on Australia's energy markets than coal seam gas since production began over years ago of natural gas and crude oil. This commercial development has ensured that the East Coast again had adequate supplies of natural gas, sufficient enough to lay the foundations for a large LNG industry in Gladstone and that domestic natural gas prices will in future reflect export parity for LNG, the same concept as import parity for crude oil. In order to ensure that this development was managed well, an Independent Expert Scientific Committee on CSG is being established under COAG. This report is the most independent, disinterested nationwide analysis yet undertaken and makes two key findings: Firstly, the environmental risks, especially with groundwater, are serious, and neither decommissioning wells nor replenishing aquifers have been properly considered and Secondly, this is another land use which needs to be regulated than like all others.

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Biofuels Issues and Trends

U.S. Energy Information Administration, October

This report is about ethanol and biodiesel. In the US, gasoline has now reached the mandated % ethanol content (.% in ).The EPA has approved its increase to % for model year and newer cars and light trucks but almost no progress has been made to-date due to concerns about warranties. As a result, there has been a marked increase in exports. The federal excise tax credits for non-cellulosic ethanol expired at the end of . Biodiesel reached .% by volume in . Production of cellulosic biofuels remains far below targets.

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Light vehicle CO emission standards for Australia. Key issues-Discussion Paper

Department of Infrastructure and Transport, .

The Government has decided that mandatory carbon dioxide emission standards will apply to new light vehicles from .The Department of Infrastructure and Transport has been given responsibility to develop the standards, in consultation with industry and key stakeholders, and will present recommendations for later consideration by Government. Current Australian standards lag a long way behind those in the EU and, in some cases, the US.

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Oil: The Next Revolution

Maugeri, Leonardo, Discussion Paper -, Belfer Center for Science and International affairs, Harvard Kennedy School, June

This paper makes the case that oil supply capacity is growing at a level which might exceed consumption and could lead to a glut and a steep dip in oil prices.

After taking into account risk factors on a country by country basis, the depletion rates of currently producing fields and their reserves growth (increases in crude oil, natural gas and natural gas liquids through extension, revision, improved recovery efficiency and the discovery of new reservoirs), the net addition by could be . mbd, yielding a global production capacity of . mbd, the most significant increase in any decade since . This growth assumes an oil price of $/bbl and only some % appear unprofitable at lower prices.

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