The appeal of a good old-fashioned culture war fight is so much greater than thinking about the hard problems of energy planning and security.
So it’s hardly surprising that the decision of Australia’s Victoria state to ban natural gas connections to new properties has turned into a replay of a cooked-up US debate about a supposed federal ban on gas stoves. (No such ban was ever proposed by the Biden administration, though the House of Representatives passed a bill in June to head off the imagined threat, just in case.) We’re likely to see similar clashes play out in historically gas-rich regions from the Netherlands to Pakistan and Mexico in the years ahead.
In truth, though, it’s a much more banal decision. Offshore petroleum was discovered in the Bass Strait separating mainland Australia from Tasmania in the 1960s, making Victoria the country’s biggest producer of oil and gas in the 1980s and 1990s. After more than 50 years in production, the natural decline that sets in at all oilfields means the Bass Strait is more or less tapped out.
The joint venture of Exxon Mobil Corp and Woodside Energy Group Ltd that has dominated production for decades is in the process of decommissioning its platforms toward a target date in 2027. A region that still supplies about 40 percent of the country’s east-coast gas market is running dry, and reforms to encourage more production (introduced in 2021 by the same premier now presenting himself as a climate campaigner) have failed to inspire viable projects.
The same pattern is playing out around the world, as historic gas producers facing the terminal decline of their petroleum fields find themselves running short of what was once a cheap energy source. (The US, for all its kerfuffle around cooktops, is one country whose booming gas industry leaves it amply supplied).
The Netherlands, whose vast Groningen field was once so productive that it twisted the entire economy out of shape, is going through the same wrenching process. A cut-flower and high-value fruit and vegetable
industry that grew up to take advantage of the low cost of heating greenhouses struggled last year as Groningen ran dry and the invasion of Ukraine choked off alternative sources of supply. The government will ban the installation of new gas boilers in homes from 2026.
Even Mexico is in similar waters. Thanks to the abundance of methane just over the border in the US, the country has seen no Pakistan-style issues in getting hold of supplies. But its increasingly gas-dependent economy made it the biggest importer of piped gas after Germany last year. Outside the Organization of the Petroleum Exporting Countries, only Egypt and Thailand among large economies are more dependent on gas to power their grids. Mexico’s over-exposure to a single imported energy source, as with Europe’s dependence on Russian methane, could become a risk as the US seeks to get higher prices for its gigajoules in the global LNG market.
David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. Views are personal, and do not represent the stand of this publication.
Credit: Bloomberg
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