When industries resist technology change very little comment is heard.
In the energy resources industry new technology boosts efficiency of converting resources into energy. This reduces demand for resources and lowers the cost of energy. It also reduces revenue of the energy resource industry.
The price of natural gas relies both on limiting supply and maintaining demand.
The economic benefits and prosperity created by access to cheap energy are being sacrificed to the short-term commercial interest of energy producers.The energy industry is not only slow to innovate, it actively resists innovation.
|The Luddite Movement in the 21st Century|
A natural gas producer in Australia is accused of manipulating the export market for liquified natural gas (LNG) so that it can increase the book value of coal seam gas reserves on its balance sheet.
Santos accused of using cynical strategy to lift gas price in Australia http://t.co/mky0BTm0E2
— Guardian Australia (@GuardianAus) May 13, 2014
The report, which was presented to the NSW Independent Pricing and Regulatory Tribunal (Ipart) on Tuesday, analyses Santos’s $19bn liquefied natural gas (LNG) export facility at Gladstone, known as GLNG.
Credit Suisse’s report says “quite clearly at face value this has been a materially unappetising project”.
The report adds: “Santos now argues that its aim in GLNG was always as much about raising the domestic gas price, and therefore re-rating large parts of the portfolio outside of GLNG, as it was about the project.’
Santos confident Australian gas prices to almost triple... http://t.co/3pZAJ7FGXr
— James Nicholson (@jamnic77) February 10, 2014
New technology and processes increase the efficiency of converting resources into energy. This reduces demand for resources and lowers the cost of energy.
Santos and another natural gas producer, AGL, are ignoring U.S. technology that can produce natural gas without the costs of drilling for coal seam gas.
Cheaper energy will benefit the Australian economy and the economies of countries that import energy from Australia.
However for Santos new technology that it could use to produce cheap natural gas means the book value of coal seam gas reserves on its balance sheet falls dramatically.
.@abcnews @pjordan_cfmeu China makes natural gas from coal. Avoids the cost of drilling for #csg, saves mining jobs. http://t.co/3XgEvgrygX
— Askgerbil Now (@Askgerbil) May 16, 2014
This situation raises questions of energy policy.
It is an example of market failure - the economic benefits and prosperity created by access to cheap energy are being sacrificed to the short-term commercial interest of energy producers reluctant to write-off reserves rendered worthless by innovation.
Further reading -
Technology change resisted by energy industry
Innovations to solve political disputes
The coal lobby scores an own goal
The coal industry's "War on Coal" campaign is all spin