New Shell QGC boss’s outlook for gas fired future

By HARRY CLARKE | IMAGES: Dan Vonhoff

SHELL QGC’s new leader insists coal seam gas development will continue for the “very long term” despite fears that recently introduced Federal Government rules aimed to reduce emissions and ensure fair domestic supply will prevent ongoing large-scale investment in the industry.

Canadian national Kim Code, who in February was appointed Shell’s senior vice president for eastern Australia, expressed confidence that growing global power demand and the need to help developing countries overcome energy poverty would continue driving gas related employment and economic prosperity in regional Queensland.

Code this week led a delegation of national media on a tour of Shell’s vast Queensland gas operation, which extracts methane from coal seams on the Western Downs and exports the fossil fuel in liquid form from its Curtis Island processing plant, off the coast of Gladstone.

“We recognise the international, domestic and local interests, we recognise that we’re in an important business and we feel pride in developing energy into the Australian system, being a major supplier,” Code said, when asked by the Caller about the purpose of the company’s public relations tour.

“The fact that cleaner energy – the energy we produce – is flexible and partners well with renewable energy … gas being the lighter end of the hydrocarbon chain, is something that we’re proud of and believe will be a core part of the energy transition for a long time to come.”

Under measures imposed in July aimed to reduce electricity prices, gas supplied by Australian producers to the domestic market is capped at $12 per gigajoule.

Critics say the new regulations, including a mandatory code of conduct requiring gas to be diverted to the domestic market and sold “at a reasonable price”, could put future international investment in gas production from the likes of London-based Shell at risk.

“I mean, I’m not going to predict the future. It frankly depends partly on geology in many cases,” Code said.

“There’s an awful lot of uncertainty in the industry on how this will unfold.

“As we make new decisions on investment, we take the impact of that into consideration with all the rest of the factors including the price lines domestically and internationally, but also including the other factors around geology, the cost, the cost of doing business in a particular area, et cetera.

“We’ll continue to assess that and it’ll really come to a head every time we look at more significant investment decisions as opposed to, sort of, adding on to things that we already have.”

Shell is among Australia’s 215 largest greenhouse gas emitters which, also since July, have been subject to a safeguard mechanism requiring them to reduce pollution in line with Federal Government aims for net zero by 2050.

Each company must reduce emission intensity – the volume of greenhouse gases released, relative to production – either by electrifying operations on site or by paying for carbon offsets.

Shell GQC has been venturing into commercial, standalone renewable energy generation projects, most notably the company’s 120MW Gangarri solar farm near Wandoan on the Western Downs.

“Anything that we can do to electrify certain aspects of that value chain and have that electrification with renewable energy behind it will decrease the footprint of that scope emission,” Code said.

“So that’s a consideration for us, whether that’s on the Curtis Island, or whether that’s on the Western Downs region where we conduct the upstream part of our business.

“Part of our footprint in the upstream is actually electrified as we stand right now. So, pushing forth on the renewable energy behind that is also an element. So there’s many elements that we can look at to continue that – and we need to.”

Operations by QGC (Queensland Gas Company) to develop coal seam gas on the Western Downs and construct a processing plant and export facility on Curtis Island began in 2010. At the time, QGC was owned by the British Gas Group but the company was acquired by Shell in 2016.

QGC has drilled 3,200 gas wells and installed 7,000km of pipeline in Queensland to date, and currently employs more than 1,500 people either directly or for contract work.

Shell’s Queensland operation is of Australia’s largest capital infrastructure projects, which in 2022 supplied 13 percent the east coast domestic gas market.

Origin Energy also has major established gas operations on the Western Downs as well as further west in Roma’s Maranoa region, alongside Santos.

More recently, Senex Energy has begun developing coal seam gas in the Maranoa region while Arrow Energy, a 50-50 joint venture between Shell and Petro China, has commenced its $10 billion Surat Gas Project near Dalby on the Western Downs.

All operations are within the Surat Basin underground coal area, where shallow coal seams with abundant methane enable cost effective and efficient development.

Land access rights and concerns about groundwater impacts caused contention between gas proponents and landholders in the early years, and while some individual disputes continue, today the relationships between resources companies and farmers in the region is generally cooperative.

A notable exception has been widely publicised concern by crop growers south west of Dalby who say extraction operations by Arrow Energy is causing land subsidence, where patches of land become sunk or undulated, preventing access by farming machinery and affecting delicate overland water flow.

In March last year Arrow was fined $1 million for breaching land access laws by failing to notify landholders of directional drilling practices being carried out beneath their paddocks.

In more “matured” gas development areas, placement of gas well is welcomed by landholders who receive compensation for ongoing operation and maintenance land access.

Compensation arrangements vary significantly depending on land values, geology and access requirements.

For reference, the Caller is aware of one landholder who receives about $9,000 annually from a gas company for four wells being stationed on their property. Annual compensation for the lifespan of wells often comes on top of an upfront payment received when the wells are first drilled.

The gas industry has driven significant and rapid population growth across the Surat Basin region.

Census data shows that between 2021 and 2006, which span of the gas industry’s development, the collective population of Western Downs centres Dalby, Chinchilla and Miles grew from 14,758 to 21,700 – an increase of 32 percent.

Asked about the longevity of gas as an energy source amid Australia’s net zero emissions ambition, Kim Code said increasing global energy demand would ensure the production industry in Australia would continue to grow.

“I think gas in the world energy system is very long term and that’s because there are still almost 2 billion people that are in a situation where there’s not enough energy for them,” she said.

“We are still bringing people out of not having enough energy that need energy, so the global energy system itself is still growing. That’s not something I control or my company controls – that’s the reality of the world.

“We need to transition to cleaner fuels which we at Shell are a part of, both in investing in renewable energy separately, but also in investing heavily in the gas side of the hydrocarbon value chain.”