Ross Gittins at the SMH has a look at the natural gas market and the bizarre spectacle of Prime Minister Malcolm Turnbull trying to promote coal fired power, backflipping from his earlier enthusiasm for 100% renewable energy - Malcolm Turnbull wants us to think he's an energy magician.

As the feds understood full well, once you can liquefy natural gas you can ship it overseas. And once you do that you've taken the relatively tiny, closed eastern Australian gas market and opened it up to the huge East Asian gas market, where prices are much higher. The inevitable consequence was a leap in the price of gas on the eastern seaboard – plus a huge windfall gain to our eastern gas producers.

Now do you see why the gas industry and federal politicians of both stripes keep repeating the economic lie that the problem has been caused by the states' bans on fracking, and could be solved by lifting them? No amount of increased gas supply on our part would be sufficient to lower the East Asian price of gas, which means no new producer of coal seam gas would be prepared to sell it to local consumers and manufacturers for anything less than they could get by selling it to Japan or China. Unless, of course, the federal government obliged them to.

I don't object to the policy of export-parity pricing but, like its predecessors, the Turnbull government wants to keep the policy a deep, dark secret because it's so much harder to defend a super-rational policy in these days of populist indulgence than it was when Malcolm Fraser did something similar to petrol prices. Turnbull wants to keep the super-rational policy, but shift the blame for its economic and political consequences to others. Had he the courage, he could oblige the gas industry to use its windfall profits to compensate the household and business losers for losses arising from an implicit government policy change.

Turnbull blames South Australia's blackouts on its excessive enthusiasm for renewable energy which, pending the development of storage arrangements, has a problem with intermittent production. He doesn't admit his parity-pricing policy is contributing. It was expected that gas-fired power generation would ease the transition from coal-fired to renewable generation. That's because gas-fired power stations emit far less carbon dioxide and can be turned on and off as required to counter renewable energy's intermittency.

Guess what? South Australia has a new and big gas-fired generator at Pelican Point, near Adelaide, but it's been mothballed. Why? Because the operator had a long-term contract for the supply of gas at a price set at the pre-export-parity level, and decided it was more lucrative to sell the gas into the East Asian market.

Last week Turnbull had the effrontery to argue that now gas-fired power had become uneconomic, we needed to fill the gap by subsidising new-generation "clean" coal-fired power stations. Small problem. They're hugely expensive, only a bit less emissions-intensive than existing coal-fired stations, can't easily be turned on and off, and would supposedly still be operating 60 years later.

If there's a case for subsidising any fossil fuel-powered generators the obvious candidate is the gas-fired plants the feds' export-parity pricing policy has rendered uneconomic. So great is the coal industry's hold over the Coalition that, not content with subsidising increased supply of coal from Adani and others at a time when coal is a sunset industry, Turnbull is now making up excuses to subsidise increased demand for coal by local electricity producers.

Economists are always telling politicians not to try picking industry winners. In reality, the politicians are far more inclined to back known losers.

Forbes has a graphic showing the size of the errors in EIA gas production forecasts and actual values. It would be useful to have this sort of data (and some better visualisations) for all energy production forecasts (if nothing else it would bring clarity to which organisations produce useful forecasts and which don't) - Got A Favorite 2017 Energy Forecast? Technology Will Make It Obsolete.

We can take this logic to data, and, fortunately, the EIA has made this exercise easy to do. Since 1996, they have published retrospective analyses of their predictions. In this useful and under-appreciated effort, the EIA compiles 20 years of forecasts into a single report and compares those forecasts to what actually happened. The last of these analyses was published in May 2015, comparing forecasts as far back as 1994 to realized outcomes through 2013. For U.S. natural gas markets, I have extended this data (both forecasted and realized) through 2015 and characterized the forecasting error of each report year, prediction year combination as driven by unexpected shocks to supply or demand. I have plotted this data in the figure below, separating forecasts made before the start of the recent shale boom in 2005 and after.

Now the Australian building boom for LNG plants (exporting natural gas from the north west and coal seam gas from the north east) is over, local utility AGL is wondering if the easiest source of gas in future may be LNG imports from elsewhere - LNG: Having spent $200bn to export gas, is Australia about to import it?.

In a 21st century variant of "selling coals to Newcastle", energy supplier AGL has flagged it may need to spend up to $300 million to build an LNG import depot to shield itself from soaring gas prices and increasing difficulty in finding reliable local supplies.

The Age has an article comparing the income generated from natural gas exports by new global production leader Australia over the previous incumbent, Qatar - Turnbull government called on to explain where Australia's offshore gas wealth is going.

By 2021 Australia will eclipse the Persian Gulf state of Qatar to become the world's biggest exporter of liquefied natural gas. In that year, when both countries are forecast to pump and ship roughly 100 billion cubic metres of LNG each, Qatar's government will receive $26.6 billion in royalties from the multinational companies exploiting its offshore gasfields. According to Treasury estimates, Australia will receive just $800 million for the same volume of gas leaving its shores.

Art Berman has an article prophesying that US natural gas prices are going to come out of their slump and double over the next year - Natural Gas Prices Should Double. His reasoning is that the supply surplus is ending (supplies have declined since October 2015 because gas production is flat, imports are decreasing and exports are increasing - shale gas production has stopped growing and conventional gas has been in long term decline for the past 15 years) and will move into deficit in November.

One of the more striking videos I've seen on Facebook in recent weeks is this video of Greens MP Jeremy Buckingham setting the Condamine river in Queensland on fire by igniting leaking gas. He blames fracking in the area - the CSIRO aren't entirely convinced but it's a good way of bringing attention to coal seam gas extraction either way.

Alarmingly, with various forms of unconventional gas extraction on the rise, Harvard researchers published a paper in Geophysical Research Letters a few months ago where they concluded that between 2002 and 2014, US methane emissions increased by more than 30 percent - accounting for 30 to 60 percent of a spike in methane in the atmosphere.

The SMH reports that Woodside's Browse project has shelved plans to build a floating LNG plant to exploit the field offshore from Western Australia.

The article notes that the Abadi project in Indonesia has also given up on floating LNG technology for now.

Woodside's reasoning seems to have been based more on the sliding price for LNG and a lack of buyers willing to make long term commitments rather than any perceived problems with the technology.

The article also noted that other FLNG projects are proceeding, such as ENI's Coral venture in Mozambique and Golar LNG's projects in west Africa for Ophir Energy and Perenco.

Shell's Prelude FLNG project in northern Australia is still going ahead as well.

Michael West has an article in the SMH posing the question "are rising Australian domestic gas prices the result of a conspiracy" - A conspiracy to stiff gas consumers.

Coal prices have crashed, the carbon tax has gone, yet the cost of electricity continues to rise. Oil prices have halved, yet the price of gas, which is linked to oil, is going up 17 per cent.

This used to be a country which thrived on an abundance of low-cost energy. Now virtually every consumer and every business is shackled by spiralling energy prices. ...

About 34,000 homes had their electricity cut off and there were more than 24,000 who had their gas cut off. There is a vicious circle in this, because the fewer people there are on the grid the more the networks charge each customer to recoup their costs.

And charge they do. Even as inflation has ebbed in recent years, and even as actual demand has receded too, the networks have kept pushing regulators for their 10 per cent returns. ...

The gas lobby has been running the line, talking about a "cliff" in gas supply. Unless new coal seam gas projects were urgently bought on the east coast would literally run out of gas. This scare campaign has been the impetus for the dramatic rise in gas prices.

Yet there is no hard evidence for it, because the gas cartel does not reveal even to the government how much there is in the way of gas reserves or what is actually contracted and at what price.

It is no secret though that, despite Australia's enormous reserves, prices have been driven up by the rush to export the stuff to Asia. Local consumers are being forced to pay international prices and the producers have diverted supply to the Gladstone plants to be turned into LNG and shipped offshore.

That, too, is now unravelling. Credit Suisse sallied forth with a report this week which pointed out gas prices had halved, in line with plunging oil, and that the Gladstone LNG projects were in financial disarray.

Personally I'd find it ard to blame rising gas prices on anything other than the linkage of domestic prices to the international export market - as long as Asian prices are higher than domestic prices once were, we'll have to pay out more. The only real solution to this, as a coalition of manufacturers have argued, is reserving a percentage of gas production for the domestic market and regulating the price (then ignoring the howls from the gas producers about missing profit opportunities). In the longer run solar power will make the issue largely irrelevant, other than for industries that need gas as a feedstock.

The SMH had an earlier article talking about the effect of exports on local prices - Local gas prices set to soar as exports to Asia get under way.

In late December, British energy giant BG Group sent the first ever shipment of liquefied natural gas from Australia's east coast, using gas from the state's booming coal seam gas industry. Granted, it sounds far removed from everyday life for most of us. But this cargo load is the start of a trend that will dramatically increase how much households pay for gas used for hot water, cooking, or heating.

It is predicted to push up many households' utility bills by a similar amount to the carbon tax, but there are no plans for compensation. And as you'd expect with a jump in the cost of living of this size, this one is producing some seriously flimsy economics.

First though, back to that shipment. Not only was it the first time that CSG has been converted into LNG, the exportable form of gas. More importantly for consumers, it was the first time gas has been exported from the east coast of Australia at all, and there is much more to come. Origin Energy and Santos this year also hope to start pumping cargo loads full of the stuff, to be sold to buyers across China, Japan, Korea, Malaysia and other Asian nations.

Economists are keeping an eye on these projects – and others in WA – as there are predictions they could make Australia the world's biggest exporter of LNG by 2018, overtaking Qatar. LNG looks set to become our second biggest export behind iron ore. But what will affect households directly is how this massive new industry transforms the domestic gas market.

Now that the east coast is able to export gas (WA has been doing it since 1989) producers have the option of selling to buyers in Asia, who are willing to pay much, much more for it than we have been.

Historically, the east coast gas market was insulated from the rest of the world, and the domestic wholesale price was stable at about $3 to $4 a gigajoule. Now, there are buyers across Asia prepared to pay $12 or $13, even when energy markets are in turmoil as they are at the moment.

ReNew Economy has an article on the dismal future for natural gas fired power generation - Record low solar prices heralds power shift from fossil fuels.

It should be a little ironic – given the dramatic plunge in the oil price that is said to have been driven by Saudi Arabian supply tactics – that a Saudi company should set two global records for cheap solar power in the past two weeks.

But to energy analysts it is yet another sign of the energy transition taking place across the world, and one that could be accelerated, rather than slowed, by the collapse in the oil price because of the cancellation and deferral of tens of billions of dollars in uneconomic fossil fuel reserves.

ACWA Power, a water and power developer based in the Saudi capital Riyadh, last week won the world’s largest ever solar tender with the cheapest ever price for a large scale solar project.

It will build – with the help of Spanish group TSK and technology from US-based First Solar – a 260MWp solar PV plant at the Mohammed Rashid Al Maktoum Solar Park in Dubai, at a cost of just $US0.058/kwh, of $US58.4/MWh.

That’s how much it will receive as a fixed tariff over 25 years for what will be – for the moment – the largest solar plant in Middle East. The price it bid is 20 per cent cheaper than the previous benchmark for solar tenders. What’s more, it is 30 per cent cheaper than the price of gas that is currently used for nearly all of the electricity generation in the United Arab Emirates.

McKinsey has a look at developments in the global market for natural gas, including some analysis of the impact of potential LNG exports from North America - Capturing value in global gas: Prepare now for an uncertain future.

Liquefied natural gas (LNG), while only accounting for 10 percent of the global gas market currently, will be a key determinant of market prices and eventual value creation, as it is the only supply source mobile enough to plug supply and demand gaps in international markets. At the moment, it is in short supply. But because uncertainty about future prices has made buyers reluctant to sign new long-term contracts under traditional terms that link gas prices to oil prices, developers of gas reserves outside North America have been hesitant to sanction new LNG facilities, particularly as LNG project costs are rising rapidly. ...

Over the past decade, regional gas markets have become much more connected, with the number of LNG or pipe routes carrying over five billion cubic meters per annum (bcma)—more than doubling between 2001 and 2011. Yet despite increased linkages, gas prices in regional markets have diverged (Exhibit 1). Three market disruptions explain this. ...

In North America, rapid growth in shale-gas production has led to four years of oversupply and plummeting gas prices. Between 2008 and 2012, production grew at an annual compound rate of 29 percent. However, gas demand failed to keep pace as consumers were slow to switch from other fuels, energy-efficiency measures offset demand growth, and exports have not been an option, since it can take five years to build an LNG export terminal and acquire the necessary permits. Consequently, gas prices in North America fell from $8.9 per million British thermal units (MMBtu) to $2.8 per MMBtu over the same period.

In Asia, LNG prices have been boosted by economic growth, coupled with Japan’s decision in 2011 to shut down its nuclear capacity following the Fukushima disaster. Japanese gas demand grew by more than 20 percent between 2010 and 2012, from 95 bcma to 117 bcma. As Japan has no domestic gas, this all had to be imported as LNG.

Finally, in Europe, an economic slowdown—combined with energy-efficiency improvements and the availability of cheap coal—contributed to an annual decline in gas demand of 1.6 percent between 2005 and 2012. This is in marked contrast to annual growth of 2.7 percent over the previous 15 years. At the same time, liquidity on traded gas markets rose as buyers who found they had contracted excess capacity sought to sell it on. As a result, prices in Europe have fallen, breaking the traditional link with oil prices. Getting to grips with longer-term uncertainty

The impact of all three developments is likely to persist in the medium term (see sidebar “Why supply will likely remain tight this decade”). But the longer-term outlook is far less clear. Four factors will be major drivers of future market dynamics and prices.

North American gas developers are eager to export their plentiful supply of cheap LNG to higher-priced markets. By the end of 2013, they had applied for export permits for more than 380 bcma—equivalent to all of the world’s current liquefaction capacity. If even one-third of this capacity were built, it would have a significant impact on global LNG prices, threatening the viability of higher-cost capacity additions in countries such as Australia and Russia and in Africa, as shown in Exhibit 2. North American exports could be highly profitable at recent LNG prices of $18 per MMBtu but could still turn a profit even if they fell to as low as $12 per MMBtu

The Climate Spectator has a pair of article on EIA research into China's appetite for natural gas. The first looks at where China currently gets its gas from - How important is gas to China's energy mix?.

China more than tripled natural gas production since 2003, producing 3.8 trillion cubic feet in 2012, and the government is targeting production to reach about 5.5 Tcf of natural gas per year by the end of 2015. Most of the anticipated production growth is from large onshore fields in the western and north central regions of China as well as from the offshore deepwater regions in the South China Sea. China's natural gas consumption has outstripped domestic supply since 2007, triggering rising imports of both liquefied natural gas and pipeline gas. China's natural gas consumption rose at an average annual rate of 17 per cent from 2003 through 2013, reaching nearly 5.7 Tcf in 2013.

In 2013, China imported nearly 1.8 Tcf of LNG and pipeline gas to fill the growing gap between supply and demand. Imported natural gas met 32 per cent of China's demand in 2013, up from 2 per cent in 2006. China is swiftly developing its LNG import capacity in the urban coastal areas and currently has 10 major regasification terminals with 1.7 Tcf/y of capacity. In 2012, China rose to become the third-largest LNG importer in the world, after Japan and South Korea, and in 2013, the country imported 870 billion cubic feet of LNG. Estimates for the first half of 2014 show LNG imports growing at faster levels than in previous years.

The second article looks at the supply situation from Russia - China's gas equation, post-Gazprom.

Russia's largest natural gas company, Gazprom, finalised a deal with the Chinese National Petroleum Corporation in May. New natural gas production in Russia will mainly come from fields in eastern Siberia, which currently lack export infrastructure. The planned Power of Siberia pipeline will export gas south to China and east to a liquefied natural gas plant on Russia's east coast.

This contract is Gazprom's largest to date. Gazprom has a monopoly on pipeline natural gas export contracts made by Russia. The situation differs from that in LNG markets, where other companies such as Rosneft and Novatek may participate.

China's northern and eastern provinces have growing natural gas demand that cannot be met by existing pipelines or LNG, and the new Russian natural gas will mostly go to meet demand in these regions. China has also committed to purchasing 38 bcm (1.3 Tcf) per year of natural gas from Turkmenistan by 2016, increasing to 65 bcm (2.2Tcf) per year by 2020.

As a footnote, Technology Review has an article on China's problems trying to develop shale gas - China’s Shale Gas Bust.

In 2013 China became the third biggest user of natural gas behind the United States and Russia, consuming 166 billion cubic meters (bcm). By 2019, the International Energy Agency expects China’s annual natural gas consumption to grow 90 percent, to 315 bcm. Half of that increase is expected to be supplied by domestic gas production, which would come from multiple sources, including shale reserves.

That IEA estimate for gas consumption is much lower than the production target China had set for itself: 420 bcm of natural gas annually by 2020, with hydrofracturing, or fracking, being used to get 60 to 80 bcm from shale.

China is estimated to hold the largest technically recoverable reserves of shale gas in the world—nearly twice as much as the U.S. But the shale industry in China has struggled to get off the ground. Most projects are still in the exploration phase. In many cases the formations that hold gas are deeper than in North America and more expensive to reach. Further, Chinese shale tends to have more clay in it, which is an obstacle to extraction (see “China Has Plenty of Shale Gas, But It Will Be Hard to Mine”). These challenges led the government last week to reduce the 2020 shale-gas target to 30 bcm.

Even that would represent a huge increase. Of the 117 bcm of natural gas that China produced in 2013, only 0.2 bcm came from shale.

The impact of LNG exports, particularly of coal seam gas, on Australian industry continues to be the topic of debate, with one recent report warning that there it will further destroy the local manufacturing industry (already reeling from Dutch disease) - High gas prices threaten thousands of jobs, billions of dollars: industry.

A new report warns the riches promised by exporting Australian gas may have a devastating impact on local industries, particularly manufacturing. A coalition of half-a-dozen industry groups commissioned the report by Deloitte Access Economics.

The report says domestic gas prices are rapidly rising as the market links in with international prices. It warns that, if the rise goes unchecked, the manufacturing sector alone will contract by as much as $118 billion by 2021, with nearly 15,000 jobs lost. The report also finds that mining might contract by $34 billion and agriculture by $4.5 billion.

The ABC has a background piece - The price of gas.

Australians pay close to the highest electricity prices in the world, and we’re about to start paying some of the world’s highest gas prices, too. That’s because we’re about to start exporting gas for the first time from the east coast, and there’s no limit to the amount of gas that can be sent overseas.

That means Australians have to compete with energy-hungry customers in Asia, who are prepared to pay top dollar for our gas. The message from the government is that if we want to use gas, we’re going to have to get used to paying top dollar, too.

‘Gas is now being sold in Australia at an international price. That’s the reality of a world market,’ says the federal minister for industry, Ian Macfarlane. ‘To protect one section of the Australian market to the detriment of those people who want to take the risk, and invest the billions of dollars it takes to develop a CSG (coal seam gas) project simply doesn’t make economic sense, and we’ll just see that investment go somewhere else.’

Australia is about to become the first country in the world to export coal seam gas—without the CSG boom in Queensland, exports on the east coast simply wouldn’t be viable. Equally, coal seam gas mining wouldn’t be feasible in Australia at the old price of $3-4 per gigajoule, because it costs a lot more to extract than conventional gas.

Customers in Asia are prepared to pay up to $18 per gigajoule for our gas. Since there’s no policy to disconnect Australia from these prices, our gas prices are now rising to meet what’s called the ‘netback’ price—the Asian price, minus the cost of processing and shipping.

For big industrial users, this is particularly bad news. ‘We're seeing prices leap from historical averages of sort of $3 to $4 a gigajoule to $9 to $12 a gigajoule or more,’ says Ben Eade, executive director of Manufacturing Australia. He says the impact of rising gas prices will ‘dwarf the impact of the carbon tax’.

A new report commissioned by industry groups and prepared by Deloitte Access Economics says skyrocketing gas prices will damage the Australian manufacturing sector to the tune of $118 billion over the next seven years, and lead to a loss of more than 14,000 jobs. ‘The fact is, high energy costs are killing industry in Australia,’ says Eade, ‘and high gas costs in particular.’

Even the companies who are willing to pay top dollar for gas are having a hard time finding it. That’s because around 80 per cent of Australia’s gas is now controlled by companies who are selling that gas to Asia. In fact, the big gas exporters have overcommitted to customers; according to Citigroup all three LNG hubs are having to buy gas from third parties in order to meet demand.

The BS reports that the Bonaparte LNG export project off Northern Australia may not follow Shell's floating LNG plant example after all - Santos' Bonaparte gas project on hold.

French energy giant GDF Suez says it is reconsidering a huge project for a floating gas liquefaction factory off northern Australia and might opt to build an undersea pipeline to Darwin. The gas fields concerned continue to have "material value", the company said on Thursday. But using a floating liquefaction plant to process the gas does not satisfy business criteria, the group said, in an important announcement for the Australian energy sector.

The overall project, called Bonaparte, involves an ambitious scheme using advanced technology to generate liquefied natural gas from resources off northern Australia. The development of floating liquefaction plants is at the forefront of efforts to turn Australia into a leading supplier of LNG in Asia.

US News and World Report has an article on speculation about the conversion of the US rail system to use LNG - Natural Gas Rolls Into World of Freight Rail

Diesel locomotives may soon go the way of the steam engine.

Liquefied natural gas, or LNG, may soon replace diesel in most of the country’s freight locomotives, the U.S. Energy Information Administration said Monday. “It’s still relatively much cheaper than the diesel-gallon equivalent,” EIA economist Nicholas Chase says. In fact, if LNG prices remain as low as they are, some rail companies believe the conversion could happen as quickly as “the dieselization revolution of the 1940s and ‘50s,” when huge numbers of trains were converted from steam to diesel, Chase says.

RNE has a look at the fading competitiveness of gas compared to solar power - Solar costs to halve as gas prices surge.

Another of the world’s leading solar PV manufacturing giants has underlined the potential for yet more substantial falls in the manufacturing cost of solar modules, even as the cost of fossil fuels – and gas in particular – surges in the opposite direction.

Beyond the near-term revenue forecasts that obsess market analysts, one of the big take-outs of First Solar’s annual market day in New York this week was its predictions about the cost of solar modules over the next five years. In short, First Solar expects its average manufacturing cost to nearly halve – from an average $US0.63/watt in 2013, to $US0.35/W in 2018. That will bring the total installed cost of a module (including racking and inverters) from around $1.59/W to below $1/W by 2017 – so meeting the US Department of Energy’s ambitious Sunshot Initiative goals at least three years ahead of time.

This is significant because as solar prices are coming down, fossil fuel prices are headed quickly in the opposite direction. The US has been hailed as the nation of cheap gas, but that is proving to be an illusion betrayed by rapid depletion rates of wells and the growing challenge of deeper and more complicated reserves. Not to mention the water and other environmental considerations.

As this story from EnergyWire states, wholesale prices in the north-east grid in the US jumped 55 per cent in 2013, thanks mostly to a 76 per cent jump in the price of gas to $US6.97/MMBTU, which is now back above its pre GFC, pre-fracking boom levels. (Bookmark the graph, and point it out to the next person that tells you how the fracking boom has guaranteed low electricity prices into the future. It’s bunkum).

The future of large-scale solar was in balance just a year ago, mostly because many of the initial big projects had been funded by California’s ambitious renewable energy target, and a strong solar mandate. But First Solar now sees this large-scale market rebounding, mostly because interest is turning to solar because of those rising gas prices. Power purchase agreements, according to Deutsche Bank analysts, are in the range of $US50-$US70/MWh (helped by a tax credit because the LCOE of most utility scale solar is still probably above $100/MWh.

Ross Gittins at the SMH has an article on the Australian government's plumbing of new moral depths, including a look at the dishonest debate about natural gas exports - Under Tony Abbott, political principles reach an all-time low.

Declining standards at federal level have been matched by bad behaviour at state level. For an example of state politicians willing to blatantly mislead their electorates, look no further than the Victorian and NSW governments' dishonest explanation for the looming jump of about 25 per cent in the price of household gas.

The true reason for the rise is that the building of natural gas liquefaction plants in Gladstone will soon allow gas producers on Australia's east coast to export their gas and obtain the much higher prices paid on the world market. The east coast will go from being outside the world market to inside it.

The price rise is thus inevitable unless governments were to prohibit the companies from exporting their gas, forcing them to continue accepting below-world prices. There has been no suggestion of penalising the gas producers in this way. Rather, state politicians have taken up the dishonest claim of the gas companies that permitting them to build new and controversial coal seam gas plants would somehow prevent gas prices from rising or force them back down. But as any student of economics could tell you, there's no way NSW and Victoria could ever produce enough natural gas to significantly affect the world price of gas.

The price of gas in NSW and Victoria would stay below the world price only if the new producers were compelled to sell their gas to local users at below the world price. Again, there's been no suggestion of this.

Last week the gas companies' illogical argument was taken up by the new NSW Minister for Energy and Resources, Anthony Roberts. I'm prepared to believe Roberts may be economically illiterate, but I don't believe his advisers are - nor that they don't read the papers, where the scam has been exposed.

Although Roberts has replaced a minister who left the cabinet under a cloud, he seems uninhibited in his efforts to mislead the electorate. It's hard to know whether he is simply seeking to advance the gas industry's vested interests or is setting up an alibi which allows the government to blame the inevitable jump in gas prices on those terrible people opposed to fracking.

Either way, his only crime is seeking to deceive voters. And these days that's the way everyone plays the political game, isn't it?

Crikey has a look at the lobbying being done on behalf of the natural gas (particularly coal seam gas) industry to try to demolish opposition to expanded drilling programs - Gas shortage? Tapping the bubbling wells of spin and self-interest. One benefit of Labor losing office is Martin Ferguson no longer being in Parliament - its a shame he didn't retire to obscurity instead of getting paid to do what he was doing before as energy minister - lobbying on behalf of the fossil fuel industry.

New South Wales is about to run out of gas, so says the scare campaign. It’s bully-boy tactics by Australia’s powerful oil and gas industry, designed to pressure the state government into quickly approving contentious coal seam gas projects proposed by Santos at Narrabri and AGL at Gloucester.

Federal Industry Minister Ian Macfarlane is on board, warning last year NSW would “run short of gas by 2016” and moving to knock heads together on the issue straight after the election. For months we have been hearing the same lines trotted out: how NSW is “running on empty”, suddenly needs “energy security”, and how developing its own “indigenous” gas supplies will ease prices.

Former John Howard industrial relations minister Peter Reith — whose recommendation to lift fracking bans was ignored by the Victorian government last year — used his column in Fairfax papers yesterday to accuse the O’Farrell government of abandoning the CSG debate, warning “there is a real prospect Sydney could suffer gas shortages”. Reith failed to disclose his consultancy with construction giant Bechtel, a major contractor to the CSG industry.

Former federal energy minister Martin Ferguson was appointed chair of new advisory group APPEA (“the voice of Australia’s oil and gas industry”) in October, barely six months after he stepped down from his cabinet post and only weeks after retiring from Parliament — flouting the 18-month cooling-off period required of ex-ministers under the lobbying code of conduct. Ferguson had a dig at his erstwhile NSW Labor colleagues for “parroting the lines of the Greens and showing itself to be completely irrelevant to the debate”, urging Premier Barry O’Farrell to break “the impasse preventing the development of the state’s abundant gas resources to put downward pressure on rising prices”.

The ABC’s fact checkers concluded Macfarlane’s alarming claims about a NSW gas shortage were “unverifiable”. They were way too generous. The claims are rubbish, designed to confuse the public. Here’s what they’re not telling you:

* No one is going to run out of gas; * Developing CSG in NSW won’t lower rising gas prices; * It’s too late anyway for NSW CSG to ease the current uncertainty affecting gas markets; and * There are plenty of alternative sources of supply for NSW.

Australia has an incredible amount of gas; we’re about to overtake Qatar to become the world’s largest exporter of liquefied natural gas. Between Western Australia, the Northern Territory and Queensland, seven LNG projects worth more than $200 billion are on the go.

The chart above shows three seriously big gas resources that supply the southern and eastern states: the massive coal seam gas in Queensland’s Bowen and Surat basins (41620PJ), plus conventional gas in the Gippsland Basin (3890PJ) and the Cooper Basin (1835PJ). Not shown but certainly exercising the mind of investors is a vast potential resource of tight and shale gas in the Cooper Basin — which may turn out to be bigger than CSG in Queensland, and which oil majors like Chevron and BG Group are scrambling to invest in. By comparison, the coal seam gas discovered in NSW is significant, but no game-changer: Santos has 1426PJ in the Gunnedah Basin, which accounts for half the state’s known reserves.

Overall, there is no doubt Australia has enough gas in the ground to supply both the domestic and export markets. As a country we can afford to think strategically, pick and choose which gas fields we develop, and in what order.

As the Australian Energy Market Operator found last year, if there’s one place in Australia susceptible to shortage it’s Gladstone in Queensland. That’s where three massive LNG export projects operated by BG, Santos and Origin Energy are about to treble gas demand in eastern Australia — ultimately representing some 80% of total gas demand in the eastern market — once they begin to come online later this year. By exposing the domestic market to higher international LNG prices of around $14-15 a gigajoule (which are geared to the oil price), the LNG projects are going to double domestic wholesale gas prices, from around $3-4/GJ to $8-10/GJ and higher, inevitably pushing up retail prices (as NSW saw last week).

The three big projects in Gladstone were approved quickly in 2010 and 2011 — without any strategic consideration of the impact on the domestic gas market — in a rush to sign lucrative contracts with buyers in Asia. It’s a bold experiment; the world’s first attempt to convert coal seam gas into LNG for export. Nobody knows yet if the thousands of CSG wells required to feed the six big LNG liquefaction units (or “trains”) under construction — each one consuming roughly as much gas each year as say Queensland or Victoria, so adding six new states’ worth of demand to the network — can be drilled fast enough, and will flow enough gas for long enough, to fulfil those contractual commitments.

Reuters reports that the Dutch government is cutting back on gas production, citing earthquakes as the reason (some peak oilers are speculating they want to lengthen the life of the field to hedge against future supply disruptions) - Dutch to cut output from huge Groningen gas field. Platts says Europe expects to fill the shortfall with additional gas import from Russia.

The Netherlands will cut gas production at Groningen, the largest gas field in western Europe, by about a quarter over the next three years, the Economics Ministry said on Friday, bowing to public concerns over earth tremors in the area.

The decision to cut production will mean lower revenues for the government at a time when it is already struggling to meet the European Union's budget deficit targets, even after years of austerity measures. "The studies showed that there are risks and consequences, including earthquakes," of the gas extraction in Groningen, Prime Minister Mark Rutte told reporters at his weekly press conference before the details were announced. ...

Gas from Groningen is sold mostly to utilities and large industries in the home market, although some gas is piped to Germany, Italy, France and Britain. The gas market has been expecting a decision to cut output, which has already driven up gas prices, analysts said.

The dawn of the gas age has made GTL an interesting prospect for those seeking to profit from the age of expensive oil. Technology Review has a look at a new technique for turning natural gas into liquid fuel - Chasing the Dream of Half-Price Gasoline from Natural Gas.

At a pilot plant in Menlo Park, California, a technician pours white pellets into a steel tube and then taps it with a wrench to make sure they settle together. He closes the tube, and oxygen and methane—the main ingredient of natural gas—flow in. Seconds later, water and ethylene, the world’s largest commodity chemical, flow out. Another simple step converts the ethylene into gasoline.

The white pellets are a catalyst developed by the Silicon Valley startup Siluria, which has raised $63.5 million in venture capital. If the catalysts work as well in a large, commercial scale plant as they do in tests, Siluria says, the company could produce gasoline from natural gas at about half the cost of making it from crude oil—at least at today’s cheap natural-gas prices.

If Siluria really can make cheap gasoline from natural gas it will have achieved something that has eluded the world’s top chemists and oil and gas companies for decades. Indeed, finding an inexpensive and direct way to upgrade natural gas into more valuable and useful chemicals and fuels could finally mean a cheap replacement for petroleum.

Natural gas burns much more cleanly than oil—power plants that burn oil emit 50 percent more carbon dioxide than natural gas ones. It also is between two and six times more abundant than oil, and its price has fallen dramatically now that technologies like fracking and horizontal drilling have led to a surge of production from unconventional sources like the Marcellus Shale. While oil costs around $100 a barrel, natural gas sells in the U.S. for the equivalent of $20 a barrel.

But until now oil has maintained a crucial advantage: natural gas is much more difficult to convert into chemicals such as those used to make plastics. And it is relatively expensive to convert natural gas into liquid fuels such as gasoline. It cost Shell $19 billion to build a massive gas-to-liquids plant in Qatar, where natural gas is almost free. The South African energy and chemicals company Sasol is considering a gas-to-liquids plant in Louisiana that it says will cost between $11 billion and $14 billion. Altogether, such plants produce only about 400,000 barrels of liquid fuels and chemicals a day, which is less than half of 1 percent of the 90 million barrels of oil produced daily around the world.

The Washington Post has a graph from Bill McKibben showing the unsustainable growth in extraction of fossil fuels - Bill McKibben’s graph of the year: We’re extracting more fossil fuels than ever.

The chart in this post, showing that even as [the United States] makes minor reductions in carbon-dioxide emissions domestically, we are mining and drilling for ever more coal and oil and gas, seems to me crucial. It demonstrates sadly that we really haven't spent the Obama years working out a new relationship with fossil fuel, which is what we needed to do.

The WaPo also has a graph from Vaclav Smil showing the divergence of global oil prices and US natural gas prices - how much of this gap will reverse when the investment boom in shale plays fades away and the underlying economics become clear remains to be seen - Vaclav Smil’s graph of the year: The natural-gas boom.

I was talking with a Jewish friend over my Christmas break and he expressed concern that Israel will become unimportant to the US as the shale oil boom reduces the importance of middle east to the US economy.

I'm doubtful that this will be the case (although hopefully military interventions like the Iraq war won't be repeated) - the reasoning I'm using is that while the US may be able to meet the majority of it's (declining) needs for oil using domestic production (including that from Canada) for some time, middle eastern oil will remain highly valuable for some time as Iraqi oil that can be produced for $5 per barrel has far more profit potential than US shale oil costing $80 per barrel to produce. As a result, there will always be an economic interest in interfering in the middle east (along with the leverage that is conferred over oil importers like Japan and China by controlling middle eastern supplies).

So I'm guessing Israel won't be left to their own devices by the Americans any time soon - this may change in a couple of decades time (possibly accelerated if there is a rapid shift to electric vehicles).

During the conversation we also touched on the Syrian conflict - I explained my theory that gas pipeline routes were one of the prime causes of the violence which resulted in the question being posed "why doesn't anything like this ever get written in the Australian media".

News Corp controlling 60% of the Australian media probably accounts for most of this, with Fairfax's continuing shrinkage of original reporting making matters worse. I had a quick look around to see if there was anything else but couldn't find anything other than a shallow piece at The Daily Reckoning and this post by Xavier Rizos at the ABC's "Drum" (and he is from France originally) - Power plays over the Syria war.

Despite these intolerable crimes against humanity, the situation is more complex than a fight between a 'good' rebellion and an 'evil' dictator. What initially looked like a repeat of the 2003 Iraq war is less likely to happen. 2013 is not 2003, Syria is not Iraq, and gas is not oil: this is the key to reading the new situation.

The Syrian conflict started as a domestic crisis but with significant global contributing factors.

For the past 10 years, IMF-backed reforms have caused an increase in unemployment and inequality. Falling oil revenues have cut the regime's ability to subsidise its economy, and drought possibly brought by climate change has contributed to rebellion in rural areas.

However it has now become a regional conflict tangled in the political strategy of isolating Iran, and the economic strategy of securing gas supplies.

This means that the crisis is beyond the point where the 'simple' removal of Assad would bring resolution or stop the blood bath fuelled by Qatar on one side and by Iran and Russia on the other side.

So far, judging by the way Putin has pushed his agenda, like a chess master culminating with an unprecedented op-ed in the New York Times, Russia is emerging as the winner from this war.

Following the dissolution of the USSR, the Russians realised they had lost the energy war. They had not secured access to the Middle East oil fields, which remained under American control. Vladimir Putin vowed not to repeat this mistake when he became president. He understood that gas was the new battlefield, and his weapon to win this time was going to be the giant company Gazprom. In the 1990s, it was privatised and its assets were stripped by corrupt oligarchs who transferred them to their families. Putin prosecuted them, ended this looting, and established state control of this strategic asset.

What came out of it has had a direct impact on today's war.

Since then, Gazprom has established a quasi monopoly on gas exports to Europe. This came to Europe's attention most powerfully in winter 2009 when a dispute between Russia and Ukraine resulted in Putin ordering cuts to exports by 60 per cent overnight. It plunged the EU into an energy crisis and reinforced its paranoia about becoming a hostage of Gazprom.

This is the origin of the EU's love affair with Qatar.

Qatar possesses some of the world's largest natural gas reserves and has been financing the Syrian rebels. In fact it has become to gas what Saudi Arabia used to be to oil, which puts it on a direct collision course with Russia and Iran.

Indeed tensions are increasing between the Qatari Sunni Emirate and the Shiite Iranian Islamic Republic because of the gas fields they share right in the middle of the Persian Gulf. While international sanctions are frustrating Iran's gas exports, Qatar is emptying the shared reserves. It is shipping liquefied gas on tankers via the Strait of Hormuz, which is under the military control of Iran. To break this vulnerability, Qatar had a project to build a gas pipeline to the Mediterranean Sea via Syria.

However Assad refused to go with this Qatari project, preferring to sign a 'Pipelineistan' deal with Iran, which had a possible extension to Lebanon to reach Europe. It was supported by Moscow which wants to prevent Qatar from supplying Europe. The Syrian civil war derailed this plan and an angered Qatar has been funding the Syrian rebels in revenge.