INTERNATIONAL ENERGY POLICY INSTITUTE
The International Energy Policy Institute (IEPI) was created to address key policy issues in the mineral, energy and resources industries through intensive and innovative research.
MULLARD SPACE SCIENCE LABORATORY
The Mullard Space Science Laboratory (MSSL) is a world-leading research organisation delivering a broad science programme that is underpinned by a strong capability in space science instrumentation, space-domain engineering, space medicine, systems engineering and project management.
Depreciate 100% shale exploration costs to stimulate jobs
20 May 2014
20 May 2014
CRETE: Australia should consider a 100% first-year depreciation of shale exploration and development costs, to stimulate unconventional gas jobs and activity, Adelaide-based researcher Navinda De Silva will tell the International Conference of the Research for Energy Management in Greece this Thursday.
Dr De Silva, a post-doctoral research associate at University College London’s International Energy Policy Institute in Adelaide, says Europe and Australia both show real shale gas potential, but Australia will require better fiscal regimes and Europe will need to lower its direct development costs before they see major development.
Incentives based on fiscal policy will be needed to develop unconventional gas resources in Australia, while in Europe it will be more about reducing costs through local supply chains and increased activity levels, the research suggests.
Dr De Silva will present his paper ‘Economic impact analysis of natural gas development and policy implications’, at the 2nd International Conference of the Research for Energy Management in Crete, Greece, this Thursday (22 May).
He will tell the conference that Europe and Australia can benefit immensely from the collective learning of the challenges concerning shale gas development, particularly that of the US.
“Shale gas has big potential in Australia, particularly in South Australia, it’s could be something quite huge,” Dr De Silva says.
“The Cooper Basin is touted as the next place to be producing shale gas, but in my opinion it’s about 10-15 years off and there needs to be a focus on what has to be done before that can happen and cost is one of the main barriers.”
Dr De Silva has modelled four policy alternatives for Australia, including:
1. 100% depreciation of exploration and development costs in the first year;
2. 70% depreciation of exploration and development costs in the first year, with the remaining divided equally across the remaining well life (14 years used);
3. PRRT holidays – first 3 years; and
4. PRRT holidays – first 5 years.
His research concludes the most commercially attractive Australian policy lever (using an annually discounting cashflow model) is full depreciation.
“Energy security implications are also very different for Australia and Europe. As described in the study, Europe will need shale gas to fulfil primary energy needs whereas Australia could use it as a swing supply source to maintain steady domestic gas prices with increasing LNG exports,” he says.
Dr De Silva has a PhD in civil engineering from Monash University and joined UCL in 2013.
Consistently ranked in the world’s top five best universities, UCL established its first overseas campus in Adelaide in 2010. UCL (Australia) now includes the UCL School of Energy and Resources, Australia, the UCL International Energy Policy Institute and an office of the UCL Mullard Space Science Laboratory.
UCL was founded in 1826 and counts 21 Nobel Prize winners among past and present alumni.
Ironically, two of Adelaide’s streets were named after members of UCL’s original council. George Grote, an English classical historian, and Henry Brougham, the First Baron and Vaux who eventually became Lord Chancellor.