Australian Shale Gas Faces Significant Challenges

A report by KPMG has said that shale gas sector faces many hurdles in Australia before it can be commercially viable.

In a report, KPMG said that significant production of shale gas is a decade away in Australia. The country will face challenges especially in terms of cost of extraction, which is three time higher than what it is in the US.

Another hurdle cited in the report is the growing opposition to fracking in the country.

“Concerns over fracking are already being raised in the context of coal seam gas, and so it is likely there would be similar concerns with shale gas,” KPMG said.

Competition from coal seam gas industry is another significant hurdle for the shale gas industry.

The report said that while coal seam gas deposits are close to large east coast population centres, the shale deposits are far away and require transportation.

However, the report said that if conditions improve, the country is well positioned to develop export markets in countries such as Malaysia, Taiwan, Japan, Korea and China, especially as some of these countries seek to diversify their energy sources.

Proposed introduction of carbon pricing mechanism in 2012 could ultimately create more demand for shale gas.

“In short, if an Australian company were to find a big enough reserve in the right place to extract it and distribute it to market, then economies of scale could make shale gas production viable,” KPMG said.