By Andrew Hobbs

SHELL Australia chairman Andrew Smith joined a chorus of speakers at the Australian Petroleum Production and Exploration Association conference in calling for greater co-operation and engagement with the renewable energy sector.

“Renewable energy sources will play an increasingly critical role in the future energy mix both in Australia and abroad,” he said.

“But to be successful, lower carbon oil and gas will need to partner with renewables to provide the full range of energy products.”

Indeed, Mr Smith said that oil and gas would remain an integral source of energy supply into the future – especially where high energy density is needed or very high temperatures required in transport or industrial processes.

He added that while many of these future projections also predicted a role for coal in the future, Australia should rethink uses of coal outside of metallurgical applications as efficient new technology power generation.

“Indeed it strikes me as absurd that a nation as rich in natural gas as Australia persists in burning brown coal for electricity generation,” he said.

“A well-regulated onshore gas industry, like that in Queensland, is the only reliable way to displace the dirtiest power generation in the nation – as a partner with renewables. But neither Labor nor the Coalition has yet shown the political will to make this happen.”

A report released by consultancy firm McKinsey & Company, The role of natural gas in Australia’s energy mix, put Australia’s current fuel supply mix at 38 per cent oil, 32% coal and 24% gas, with the remaining 6% derived from renewables and other sources.

When energy used for power was combined with that used in other sectors, Australia’s total supply mix would end up at 39% oil, 27% coal and 25% gas by 2030, with renewables and other sources supplying 9%.

“This equates to 43 billion cubic metres (Bcm) of gas, compared with 36 Bcm of gas in 2014,” the consultancy said.

“In this scenario… total emissions could be around 640 million tonnes of carbon dioxide equivalent in 2030.”

“This would exceed the COP 21 emissions target for Australia”

As Treasury predicts Australia will need another 873 petajoules of energy by 2030, a new approach to meeting energy needs while reducing emissions is needed, McKinsey said.

The report said major expansion opportunities existed for natural gas in the transport sector, recommending it be used to power freight trucks, mining trucks, passenger buses, locomotives outside major cities and as a bunkering fuel for domestic ships.

“There is a chicken-and-egg problem, the number of liquefied natural gas or compressed natural gas refuelling stations around the country is quite low, and less than 0.4% of vehicles currently use natural gas as fuel,” the report said.

“If implemented fully, these [options] could create economic value of around US$1 billion annually while also reducing Australia’s CO2 emissions by up to 1.7 million tonnes in 2030.”

The report added that increased use of gas for power could reduce emissions from the sector by displacing other, higher-emitting forms of generation.

Shifting the fuel mix to natural gas would require new infrastructure and a will among the oil, gas and transport industries to invest, which McKinsey said would not be an easy path.

“The reward is the potential dual payoff of a stronger economy driven by a lower cost fuel mix, alongside lower CO2 emissions.”