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Monday, 27 February 2006
Page: 103

Senator WEBBER (8:07 PM) —The Offshore Petroleum Bill 2005 and its associated bills replace the Petroleum (Submerged Lands) Act 1967. Although we are told that these new bills aim to simply rewrite the 1967 act to make it more user friendly, we are confronted with these new bills that increase in size from some 400 pages to over 600. Of course, in these days of extensive explanatory memoranda, this also runs to about 300 pages. It is interesting that, to make something easier for industry to operate and for government to regulate, it somehow requires more words than the act it is replacing. It puts one in mind of the new fairer, simpler tax act that doubles the length of the tax act. So we should not ever be surprised about how this government talks about the need to simplify but it always ends up with more and more provisions to do so. There must be some perverse logic along the lines that, by making it more complex, longer and more verbose, we are in fact simplifying it.

Having said that, I believe that we, like other industrialised nations, need to do better when it comes to our love affair with petroleum and its products. It is passing strange to hear no less than the President of the United States say exactly the same thing to the people of America in his State of the Union address. Quoting President Bush is not something I thought I would be doing, but the point he made about our overreliance on petroleum was a point well made. Petroleum and other energy products such as LPG represent nearly 10 per cent of Australia’s export revenue. It is an important part of our country’s trade performance and, as such, it deserves our close attention. But the fact remains that, although we exported over $8 billion worth of petroleum and gas and a further $1 billion worth of refined products, we imported over $10 billion worth of the same products. So, whichever way we want to consider it, we are a net importer of petroleum and gas.

So, just like President Bush said to the American people, we also need to do more to reduce our reliance on oil and gas imports. It is simple supply and demand, really. As demand increases, especially in China and India, and as supply remains at its current levels, prices will continue to rise. There is no way to change that simple law of economics. So if we as a country continue to rely on importing oil to drive our cars and fuel our transport sector then we will have to face up to increasing prices. It is estimated that, by the year 2020, the demand for energy in this country will have increased by some 50 per cent. We are looking at a situation in which, by 2020, over 60 of Australia’s requirements for fuels will be imported.

In fact, in March 2003, when I spoke on the Energy Grants (Credits) Scheme Bill in this place, the price of oil at that stage was $37 per barrel. Now, a short three years later, the price is around $60 per barrel and rising. The reality is that our oil reserves are being used at such a rate that, by 2020, we will be producing less than half what we currently produce. Over that same time, demand is likely to increase threefold. The United States Energy Information Administration, in an article posted in 2004 entitled ‘Long-term world oil supply scenarios’, concluded:

Will the world ever physically run out of crude oil? No, but only because it will eventually become very expensive in absence of lower-cost alternatives.

This is the reality that exists for all users of oil. It is a reality that is not often acknowledged. That is why I am pleased to have seen President Bush raise the issue. We all need to understand that, unless we find alternatives, we are destined to eventually reach the position that although oil will still be available we just will not be able to afford it. The report goes on to say:

In any event, the world production peak for conventionally reservoired crude is unlikely to be “right around the corner” as so many other estimators have been predicting. Our analysis shows that it will be closer to the middle of the 21st century than to its beginning. Given the long lead times required for significant mass-market penetration of new energy technologies, this result in no way justifies complacency about both supply-side and demand-side research and development.

Although the Energy Information Administration article concludes that scarcity will not be a problem for decades, it is also clear that the long lead times that are required to move to new technology means that we can no longer afford to wait. If we continue to rely on foreign oil to fuel our transport requirements, we will be facing a substantial decline in our living standards because of increased fuel prices.

However, there are answers and solutions to this dependence on foreign oil. Firstly, we can continue to encourage exploration and investment to bring additional sources of petroleum online here in Australia. We need to engage more actively with industry to find new sources of oil. We need to ensure that the regulatory framework is as efficient and as appropriate as possible. As a nation, we need to ensure that the necessary infrastructure is in place and that there are sufficient skills in the Australian labour market to ensure our maximum exploitation of this industry.

Secondly, we can do as President Bush suggests and use technology and research to find alternative sources of energy. It is a fact that we already possess the technology and raw materials to do just that; what is missing, however, is leadership from the government. Consider these points. We have large reserves of natural gas, particularly in my home state of Western Australia. We have a car industry that already has the capacity to manufacture LPG dedicated vehicles. A motor vehicle travelling 20,000 kilometres a year that is powered solely by gas produces 600 cubic metres fewer greenhouse gas emissions than a car burning petrol. The saving at the petrol station for a car travelling 20,000 kilometres per year is at least $1,200 dollars per year based on current prices.

What is needed here is national leadership. There is no reason why Australian car manufacturers could not become the world leaders in the production of gas powered vehicles. As many of us know, most taxis in this country now run on gas; so why does this government not take a lead by announcing that all new government fleet vehicles must be solely powered by gas? Consider the boost to Australian car makers. Over time, there is no reason why we could not move to phase out petrol powered cars in favour of those powered by gas, especially if the government were prepared to lead by example. The way to do that is exactly the same as we have done in the past. When the manufacture of cars was changed with the introduction of unleaded petrol, the doomsayers predicted all sorts of chaos and pain. However, we have seen that this was not the case and over time we have largely made that transition.

Let us be clear, though: this is not the sort of change that comes about in a short time. It is a change that comes about over decades. That is why we need to start moving towards gas powered vehicles now, to ensure that we make the most of those decades. The worst thing we can do is to not start to address the problem. Why don’t we offer worthwhile rebates to car purchasers to encourage more of them to switch to gas powered vehicles? The current cost for a Ford Falcon powered by gas is $37,280, as opposed to $34,880 for one powered by petrol. If we could, as a nation, increase the market for cars powered solely by gas, I am sure that the price would fall. We have a unique opportunity here to take a lead on this. Why wait until petrol is so expensive that we suffer a decline in our living standards?

Having said that, I believe we also need to consider what we are doing about developing our gas resources onshore. We confront the same situation that we have confronted in this country for many years: we have abundant natural resources, we extract them and then we export them offshore. There is no reason why we should not be developing an Australian industry that converts gas to liquids. I understand that in Qatar they have just spent over $10 billion developing a major infrastructure project to do just that. I fail to understand why Australia is not developing a similar project. Should we end up exporting our gas to Qatar so that they can process it and we can import the refined product back to Australia? We should be taking the opportunity currently available as a result of the resources boom. We need to use the proceeds of this boom to fund the development of new industries that will provide the future economic growth that this country needs, because the current resources boom will not last forever.

Our oil and gas industry does not simply need a rewrite of the previous bill. What is needed is a decent, long-term plan of action that ensures the viability of the oil and gas industry. As I have said before, if we continue as we are, then as the cost of petrol continues to increase so will our standard of living fall. Australia is blessed with abundant natural resources. What we are not blessed with is the vision to use those natural resources most effectively. We need a Commonwealth government that has a plan to reduce our reliance on foreign fuels. Surely, now that the President of the United States is running the argument that the US needs to reduce its reliance on foreign fuel and find alternatives, the Commonwealth government will wake up and confront the same issue.

Compare our approach to the oil issue with that of Sweden. Sweden has just announced the establishment of a committee made up of industrialists, academics, farmers, car makers, public servants and others, which will report to its parliament in several months. The aim of the Swedes is to replace all fossil fuels with renewable energy within 14 years. As their Minister for Sustainable Development has said:

A Sweden free of fossil fuels would give us enormous advantages, not least by reducing the impact from fluctuations in oil prices. The price of oil has tripled since 1996!

Consider the head start the Swedes already have: 20 per cent of all their energy needs in 2003 came from renewable resources. Only 32 per cent of their total energy came from oil, which was down from 77 per cent in 1970. Before Australia takes the option that some have called for, of considering nuclear energy, we should be following the lead of Sweden and beginning to plan for an economy that is not reliant on imported oil.

I would like to conclude my remarks by talking about the state of the oil and gas industry in Western Australia. In the last financial year, the growth of exports from WA’s oil and gas industry has soared. Crude petroleum oils were up $650 million, which is a more than 80 per cent increase over the previous year. Natural gas exports in the same year were up $337 million, or over 64 per cent from the previous year. Those figures speak for themselves. In the June quarter of 2005 the value of oil and gas exports from Western Australia was over $2.5 billion. That is just for one quarter. Currently in Western Australia over $10 billion worth of oil and gas projects are approved or awaiting approval. These are huge projects, which will continue to earn revenue for the Commonwealth and valuable export dollars for Australia. The state government of Western Australia is spending over $180 million on infrastructure projects in the north-west to support those industries. The Commonwealth, however, is spending nothing.

It is all good and well to rewrite the petroleum bill, but when is the Commonwealth going to put its money on the table for infrastructure projects that will support the ongoing growth of Australia’s oil and gas industry? I would like to place on the record the superb work that has been done by Alan Carpenter, now Premier of Western Australia but previously the minister for state development, and his predecessor Clive Brown, in encouraging the expansion of the oil and gas industries and ensuring that the state’s infrastructure plan meets the needs of those industries.

We have a unique opportunity to start working towards reducing our reliance on imported fuels. We must grasp this chance, which is provided on the back of the current resources boom, to build for Australia’s future. What is needed is a vision for the future, not a rewrite of existing legislation.