South Australia is stronger with natural gas

If South Australians have any doubt about the long history of the oil and gas industry in the state, they only have to gaze upon the stained glass windows of Adelaide’s St Peters Cathedral. There, in a mural which traces South Australia’s spiritual journey from ancient times to our modern-day state, is an image of a drilling rig. The rig portrayed was operated by Santos, which was founded in the 1950s to search for oil, then gas, in the Cooper Basin in South Australia’s north east corner.

Since natural gas was first discovered in South Australia, the state has benefitted enormously from its natural resources. Historically, locally produced gas was not only used to generate electricity and heat South Australian’s homes, but also to power the region’s timber milling, pulp and paper milling, and commercial food production.

However, with natural gas production in South Australia continuing to decline more and more gas is being sourced from neighbouring Victoria and Queensland. To regain the economic advantages of producing in-state, and ensure adequate supply is available, more exploration and production is needed.

Locally sourced natural gas benefits SA residents

Energy Costs

Today, South Australia is full of local businesses that depend upon reliable and affordable natural gas. For example, the state’s fast-growing dairy processing industry relies on natural gas for up to 55 per cent of its energy needs. South Australia is not unique in this respect: nationally, manufacturers consume up to 40 per cent of the gas in Australia, either as a direct manufacturing input or for heating electricity or other product processing.

Increasing local production of natural gas has the potential to lower energy costs and increase manufacturing employment according to U.S. research. The U.S. Energy Information Agency confirmed:

“Natural gas has been an important exception to the trend of rising prices for energy sources used by manufacturers. Production of natural gas in the United States increased rapidly beginning in 2007 as a result of resources found in shale formations. That increase in supply has in turn lowered the price of natural gas to manufacturers as well as other consumers.”

Similarly, a 2018 report from the environmental think tank Resources for the Future, noted that the decline in American natural gas prices helped grow U.S. manufacturing employment by up to 1.8 percent between 2007 and 2012. From the report:

“Based on standard microeconomic theory, a decline in the price of an input, such as natural gas, reduces marginal production costs, increases output, and reduces output prices. The output increase raises employment, and the decrease in natural gas prices relative to wages can increase or decrease employment depending on whether natural gas and employment are complements or substitutes in production.”

Employment Opportunities

South Australia has long struggled with a so-called ‘brain drain‘ with talented locals looking interstate or overseas for work. The State’s inability to retain talented youth is so serious that recent budget population projections show that South Australia is set to lose 6,500 residents a year. Developing the state’s resources provides a natural opportunity to increase local and regional employment potential. As the Great Australian Bight Research Program determined:

“There was a skills shortage in the region, and that direct employment opportunities from an oil and gas development would result in an influx of workers. Infrastructure in the region was considered relatively poor by the community, and improvements in infrastructure as a result of any development would benefit existing industries.”

The skilled work available in South Australia’s oil and gas sector provides a range of opportunities for the local workforce and further development promises even more opportunity for the next generation of workers.

Third-party suppliers

Development of South Australia’s oil and gas industry also has the effect of building a network of third-party suppliers, opening possibilities for local entrepreneurship and employment in fields that support the local production sites.

Third-party suppliers needed to support the industry and its people include:

  • Food
  • Staffing
  • Education & Training
  • Equipment design and production
  • Transportation
  • Construction
  • Professional services
  • Waste management

Data analysed by National Energy Resources Australia found that 103,000 Australian jobs result from the oil and gas industry supply chain and consumer spending by direct and indirect employment by the industry sustained 88,000 other jobs in Australia in 2016.

Productivity

Land usage in South Australia includes both below and above-ground resource access. Natural gas and oil production allow greater land productivity as it is one of the few industries that allows for shared land access and use, and greater efficiency of land use means better economic outcomes for South Australia. A 2012 Productivity Commission Report on resource exploration stated:

“Any [land use] assessment should weigh up the costs and benefits to all Australians of the use of the land as a park or reserve (as well as any permitted shared use) compared to the costs and benefits of alternative land uses, including the potential value of any minerals and energy resources in the area.”

Onshore natural gas extraction involves only a small amount of land above-ground to access the gas stored 1000 to 4000 metres below ground. The cement-reinforced pipe used to extract the gas is pressure-tested, and along with natural impermeable rock, protects underground aquifers. These limited land-use and strong environmental protection measures make mutual use simple, leading to greater productivity. The gas industry works with agriculture landholders to ensure positive collaboration between our industries.

Similarly, safe well drilling and extraction practices and consultation with other users of the marine environment ensure no negative impacts on fishing, tourism or scientific research from offshore oil and gas exploration and development.

Evidence of this successful coexistence has been noted in academic studies, New York Times articles, and by the U.S. Bureau of Safety and Environmental Enforcement.

With lower energy costs, better job prospects and more money generated by each acre of South Australian land from local oil and gas production, residents can expect a stronger future.

For more on the successful coexistence of the oil and gas industry and local industries check out our factsheet.

Natural gas – supporting renewable energy

While renewable energy continues to develop, fossil fuels will remain a staple source of energy for the majority of our activities. Complementary use of natural gas and renewables can help South Australia transition smoothly. The significant contribution of gas-fired power generation in South Australia has enabled the state to lead the nation in the integration of wind and solar energy. Overseas, a study out of Nagasaki University found that there can be a complementary relationship between renewable and non-renewable energy in industries including metals, chemicals, construction, food, minerals, pulp, textiles, and wood.

Current challenges facing renewables is the intermittent nature of the energy generation methods. To ensure that local businesses and residents receive consistent energy to run machinery, aircons and lights, another secure source of energy must kick in when renewables fail. Natural gas is energy generators can be easily switched on and off as needed, and such fast-reacting generators have been associated with an increase in renewable energy use.

In fact, the U.S. Energy Information Agency acknowledges: “Natural gas has an important role to play in complementing low-carbon energy solutions by providing the flexibility needed to support a growing renewables component in power generation.”

With the help of oil and gas production, South Australia is able to put downward pressure on energy costs, provide more jobs, increase our land productivity, and aid in the transition to a greener future.

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