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Address to the Asia Pacific Oil and Gas Conference and Exhibition, Perth



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Asia Pacific Oil and Gas Conference and Exhibition

The Hon Martin Ferguson AM MP

Minister for Resources and Energy

Minister for Tourism

Perth Convention and Exhibition Centre

Tuesday, 23 October 2012

* Check against delivery

Introduction

I would like to thank the Society of Petroleum Engineers

for hosting this event and for the invitation to speak today.

I am very proud of the role Australia plays in supporting

global growth and development through the stable supply

of energy, particularly to the Asia-Pacific region.

This role is becoming even more important as the growth

in global energy demand is showing no sign of slowing.

With this in mind, the theme of this year’s conference —

Providing a bright future — is very apt.

This theme recognises the strong link between global

economic growth and energy demand, and Australia’s

economic future.

It also recognises Australia’s capacity to be a world-class

and sustainable supplier of energy—particularly natural

gas.

Growing global gas demand

The International Energy Agency (IEA) projects that global

energy demand will grow by around 40 per cent by 2035.

Developing countries, mostly in the Asia-Pacific region,

will account for 90 per cent of this growth.

The IEA has forecast that natural gas will be the world’s

fastest growing source of energy, increasingly powering

the worlds' growing economies with a cleaner burning fuel.

The IEA predicts that the share of natural gas in the global

energy mix will continue to rise until 2035, to the point

where it almost equals that of coal.

LNG outlook

LNG will play an important role in meeting the global

demand for natural gas.

ExxonMobil has forecast that the global LNG trade will

approach 600 million tonnes by 2040, up from 240 million

tonnes in 2011.

While new sources of LNG supply, such as US shale and

East African gas, will make for a more competitive market

place, new sources of demand are also emerging.

Unsurprisingly growth of LNG imports is strongest in the

Asia-Pacific region, including in traditional markets such

as Japan.

Chinese LNG demand growth continues to defy forecasts,

as 2011’s 30 per cent import growth looks to be repeated

in 2012.

China’s demand for natural gas is expected to more than

quadruple by 2035, equalling that of the entire European

Union.

India, Singapore, Thailand, Cambodia, and Vietnam are

projected to import a combined 41 million tonnes of LNG

by 2017.

As a result of this increasing demand, LNG is forecast to

be Australia’s fastest growing energy export over the next

two decades.

We are well placed to meet this increasing demand for

LNG and compete in the global energy market.

In the six years between 2011 and 2017, Australia’s LNG

export capacity will have quadrupled to 80 million tonnes.

The number of operating LNG trains will more than triple

from six to 21, potentially making Australia the world’s

largest LNG exporter.

Australian LNG exports were worth over $12 billion in

2011-12. They will grow to over $16 billion this financial

year.

LNG is also increasingly seen as a future fuel of choice for

the shipping industry.

It is regarded as a cleaner and more efficient fuel for the

industry.

Lloyds has released a study with a base-case LNG

demand for shipping of 24.6 million tonnes of LNG per

annum by 2025. This equals Australia’s current LNG

production.

The high case for shipping has demand at 66 million

tonnes on LNG by 2025.

As an example of where the industry is headed, Incat in

Tasmania is building its first LNG-powered high-speed

ferry.

Small-scale LNG is increasingly being used in a number of

applications.

Its use in the trucking industry, both in Australia and in

many places overseas, is expanding rapidly.

Research into new developments

It is evident that the LNG industry appears to have a bright

future, but there are still considerable challenges ahead.

The success of major projects is the result of an enormous

amount of work.

Projects require the right people, the right skills and the

right resources to come together at the right time.

Technology has played a key role in the transformation of

the petroleum sector.

It underpins the importance of continued investment in

research and development.

The ongoing success of Australia’s petroleum industry will

be shaped by our ability to be innovative and to foster

advances in technology.

Unconventional gas and floating LNG are just two

examples of how new technologies have transformed the

petroleum sector.

In the United States, it was the development of long-reach

horizontal drilling, coupled with continuous improvements

in hydraulic fracturing technology, which unlocked the

potential of US shale gas.

While it is still early days, Australia’s unconventional gas

sector looks set for a similar growth story.

The $60 billion coal seam gas to LNG industry emerging

in Queensland is creating thousands of jobs, and will

facilitate the first exports of LNG from the eastern states.

Australian companies, like Santos, Beach Energy and

Buru Energy, are also moving to unlock our tight and

shale gas potential.

Santos will shortly have our first commercial shale gas

well in production in the Cooper Basin.

It is the adoption, adaption and innovation of technology in

our own resources sector which is driving this

development.

Likewise, in the offshore sector we are seeing innovation

driving development.

Much has been said of Shell’s groundbreaking Prelude

floating LNG project in waters offshore Western Australia.

The advent of floating LNG has significant potential for

LNG growth, not just in Australia, but also around the

world.

It provides a means of accessing stranded offshore gas

resources and opens expansion potential for the industry,

without placing additional strain on onshore infrastructure

or the environment.

However, new unconventional gas and floating LNG

technologies are just two of many.

On the back of technological advancements and

innovative design solutions, we are seeing offshore

operations take place in deeper water and in more

challenging conditions.

These developments mean natural gas previously thought

to be unreachable is now within our grasp.

This would not be the case without a commitment to, and

investment in, research and technological development.

Perth is establishing itself not only as an important service

centre for the oil and gas industry, but also as a significant

hub for research and innovation.

Curtin University and the University of Western Australia

are working with industry to undertake groundbreaking

research.

The Universities are looking at new and innovative ways

to explore for, extract, and process natural gas.

Shell will pioneer training for floating LNG operations

through the Global Centre for Floating LNG Learning and

Research.

Working in partnership with Curtin University, this facility

will train future operators of floating LNG from Australia

and around the world.

Chevron opened its Perth Global Technology Centre in

2007. The Centre will assist in the identification of new

research and development opportunities in the exploration

and production of oil and gas.

Woodside has also partnered with research bodies to

investigate new ways to further our understanding of

offshore resources, improve methods of exploration and

extraction, and promote better environmental outcomes.

The Australian Centre for Energy and Process Training at

the Challenger Institute is providing hands-on training in

plant operations.

This is a significant step towards training the local LNG

plant operator workforce, which is expected to more than

quadruple in the near future.

In the sphere of information sharing and collaboration, the

Australian Government has partnered with the Western

Australia Government and the North West Shelf Venture

to form the Australia-China Natural Gas Technology

Partnership Fund.

The Fund aims to expand participants’ knowledge of

natural gas industries in Australia and China, and create

opportunities for professional training, research,

technology development and networking.

These are all outstanding examples of how the

government and industry are working together to fulfil our

role in supporting learning, innovation and engagement.

The way forward

If we are to continue to build on our success and maintain

a competitive edge in the global energy market, this

commitment to research and development must continue.

This is why the Australian Government is assisting in the

development of the IEA’s proposed Implementing

Agreement on gas and oil technologies.

The proposed agreement and its program of work will

provide a forum for industry, the global research

community and government.

It will allow the opportunity to share expertise and ideas on

research and development initiatives and best practice

technologies.

By strengthening these partnerships, we will secure

genuine sustainability and lasting prosperity.

I would also like to take this opportunity to acknowledge

the importance of people and the professions involved in

the industry.

Much of the success of Australia’s petroleum sector is due

to the ability to access a skilled, motivated, and mobile

workforce.

I acknowledge that current labour shortages are a

potential barrier to growth—a challenge industry and

government can face together.

We must also foster a whole new generation of petroleum

engineers and other skilled professionals.

It is for this reason that I commend the Society of

Petroleum Engineers for their work with university

students.

Their efforts have fostered interest and engagement

across the sector more broadly.

I note that today is Education and Teacher’s Day at the

conference.

I encourage students and teachers here today to ask

questions, to learn about the importance of the industry,

and to understand the abundance of career opportunities

it provides.

I would also like to take this opportunity to reach out to

young women and Indigenous Australians.

I encourage you to consider a career in engineering and to

learn about the range of opportunities that are open to you

through this industry.

Social Licence

The role of the resources sector in fostering the growth

and development of its future workforce also points to

other areas where industry has a leading role to play.

Australia’s resources are owned by the wider Australian

community with government the steward on behalf of the

Australian people.

The resources industry is granted the opportunity to

explore and develop Australia’s rich resource potential.

The use of technology in the sector is increasing the reach

of the industry to resources previously considered not

practical or possible to develop.

As the technical issues in resource development are

overcome, we must also recognise that industry has a

responsibility to gain and maintain a social licence to

operate.

Today the promise of investment, jobs and economic

growth is not enough to guarantee project success.

The technology and process of resource development

needs to be fully explained to and understood by the

Australian community.

This task is all the more important and challenging, when

you are at the cutting edge of introducing new technology.

The same is pertinent when applying previously proven

technologies to new purposes or commencing operations

in a community which has little experience of the

petroleum industry or the technologies proposed to be

used.

While some engineers may see this task as falling to

others, I believe that it is best undertaken with

responsibility shared across the organisation.

At the very least those charged with designing and

implementing technical aspects of petroleum operations

need to bear potential community reaction in mind.

They must be aware of the challenges that will be

encountered in the critically important task of educating

the community about the benefits and risks associated

with what is proposed.

Projects applying the most advanced and lowest risk

technologies stand a good chance of failing if effected

communities are not assisted in understanding,

appreciating and accepting that what is proposed is the

best way forward.

There must be real benefits flowing from the growing

resources sector in developing people, communities and

the wider Australian economy.

I am aware of the significant efforts of resources

companies to actively participate in and contribute to the

communities within which they operate.

There are many examples of companies not only

participating in, but also initiating community development,

education and training programs.

The social licence to operate is not a static concept.

Once gained it is a constantly evolving process that

demands flexible and innovative practice to hold that

licence.

Again, I am confident we can all rise to this challenge.

Conclusion

Australia’s reputation in this industry truly is unrivalled—

something I am very proud of.

I am positive about Australia’s long-term energy future.

But, I know our work does not end here.

We cannot take future growth of the industry in Australia

for granted.

We have an increasing responsibility to show leadership in

research and development, long-term planning, and

environmental best practice.

These are all positive inputs for the industry and its social

licence.

I am confident we can work together to achieve this.

Australia has the opportunity to demonstrate that we have

the skills, knowledge and resources to meet global

demand for natural gas, support global growth and

development, and fulfil the promise of a brighter future.

Thank you.