Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Full Day's HansardDownload Full Day's Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Tuesday, 26 August 1980
Page: 703


Mr MALCOLM FRASER (Wannon) (Prime Minister) - by leave - I would like to review the Government's energy policy and to outline the quite exciting prospects ahead for Australia in the area of resource development. Our energy policies are firmly in place and recent events serve to illustrate their correctness. Successes in this area are already evident; but in view of the uncertainties about future oil prices and supplies we cannot relax our efforts. Associated with the rapid increases in crude oil prices, there has been a dramatic increase in the demand for the energy resources with which Australia is richly endowed. It has provided Australia with great opportunities. Australia's objective must be to make the most of those opportunities, while continuing to reduce our vulnerability to disruptions of world oil supplies, and to further increases in world oil prices.

The energy problem is a global one. Failure to make appropriate adjustments will mean lower world economic growth, higher unemployment and inflation. Sustained economic growth in the remainder of the century will require further major changes in the Western world's energy usage patterns. Australia is participating in discussions on energy with our industrialised partners within the International Energy Agency. The IE A has emphasised the need for measures to reduce levels of imports, to use oil more effectively, and to develop alternative energy sources. There is overwhelming agreement within the IEA that domestic oil prices must reflect fully movements in internationally traded oil prices. The Venice economic summit in June agreed on the need to place maximum reliance on realistic pricing to reduce dependence on crude oil. These strategies represent a full endorsement of Australia's energy policies, especially our crude oil pricing policy.

Australia's Opportunities

Australia's position is one of considerable opportunity, but at the same time, of some risk to which I shall refer later. Our energy resources, combined with abundant supplies of many raw materials, create the opportunity for a large expansion in energy exports and in energy intensive resource developments. These developments will add greatly to our national product, to incomes and to wealth, and all Australians stand to benefit from being members of a wealthier society. The benefits of economic growth will, as always, extend far beyond those directly involved; they will entend to all sections of Australian society.

Australia's potential is illustrated by:

Increased interest in and demand for direct exports of energy sources from Australia, primarily coal but also liquefied natural gas;

Increased desire to process raw materials in Australia; and

Accelerated plans to increase coal-based electricity generating capacity in Australia.

The developments in prospect will, of course, need to comply with Government requirements in areas such as the environment, foreign ownership, and taxation. We are determined that all companies, both domestic and foreign owned, shall operate in the interests of all Australians.

Australia recognises its responsibilities in an increasingly energy hungry world. Our rich resource endowment carries with it an international responsibility to make resources available on fair terms and conditions to countries less well endowed than ourselves. Developed and developing countries alike are vitally dependent on stable and secure supplies of resources for their economic advancement and well-being. In turn, Australia expects consuming countries to provide stable access for our resources by way of long term contracts. This is absolutely essential if companies are to commit the huge amounts of risk capital which are necessary to bring Australia's resource projects on stream in the 1980s.

Coal

Australia's greatest energy resource is coal, which comprises over 80 per cent of our identified energy resources. As well as providing 70 to 80 per cent of the country's electricity, coal is a major and rising export product, with total exports reaching 38 million tonnes in 1978-79. With increasing emphasis on coal-generated electricity throughout the world, Australian exports of steaming coal are expected to increase greatly in future years. The Government is determined that potential developments should not be held back by lack of necessary infrastructure.

To this end, projects involving borrowings amounting to around $228m to provide coal export facilities have already been approved by the Loan Council under the infrastructure program. In addition, the Loan Council has approved borrowings of $182m for up-grading and electrification of the Waterfall-Port Kembla railway, primarily to facilitate haulage of coal to the new loader at Port Kembla. Possible infrastructure borrowings to finance electrification of other coal railways are under consideration.

Liquefied Natural Gas

Plans for the north-west shelf project are firming up, with arrangements for the joint venturers to supply natural gas to Western Australia in 1984 and to commence exports of LNG in 1986. The joint venturers have demonstrated their confidence in the project by letting contracts for construction of some of the major facilities, and arranging the borrowings to finance development of the project.

Uranium

Australia contains around 16 per cent of the Western world's low cost reasonably assured uranium reserves. Although anticipated growth of nuclear power programs in some countries has been reduced in the last few years, there are signs that the contribution which nuclear power can make to energy needs is being reassessed in the light of the overriding priority of reducing reliance on oil.

Raw Material Processing

As the cost of oil continues to rise, it is becoming increasingly attractive to process raw materials in Australia in preference to transporting them to other countries where energy costs are higher or where there is a doubt about the availability of the required energy. The availability in Australia of low cost coal-based electricity is of prime importance. The combination of low cost energy and plentiful supplies of raw materials has increased the opportunities for economic raw materials processing in Australia.

The most outstanding example here is aluminium smelting. Annual smelting capacity is expected to expand from 280,000 tonnes at present to about 1 .3 million tonnes over the next five years, requiring the investment of around $2.9 billion. Further aluminium projects under serious consideration could lift annual capacity to over two million tonnes in the second half of the 1980s, bringing total potential investment in the industry to around S4.5 billion. In addition, substantial new facilities are planned for the petrochemical industry, based primarily on hydrocarbon feedstock material from Bass Strait and the Cooper Basin.

Electricity

Investment in additional electricity generating capacity represents one of the greatest development challenges in Australia. Recognising the very high cost of, and long lead times associated with the construction of electricity generating stations, the Commonwealth has taken a series of initiatives to encourage and assist the State authorities concerned.

The Commonwealth has encouraged the States to bring forward proposals for coal-based electricity projects to be financed under the infrastructure program which it initiated specifically to facilitate the provision of public sector infrastructure required to complement the big prospective increase in private sector investment in developmental projects. Borrowings of $3 billion have been approved under this program for electricity generating projects with an estimated total cost of $7.4 billion. One can see from that the enormous assistance that this program gives to the State governments involved.

In addition, there are under examination further electricity generating projects proposed, including those by New South Wales and Queensland for which total borrowings of about $4.4 billion are being sought towards outlays of $9.1 billion, and further proposals from other States have also been foreshadowed. It is difficult to convey the magnitude and importance to Australia of those developments. Projects already approved will add 40 per cent to Australian electricity generating capacity by about 1990. The proposals from New South Wales and Queensland currently being examined by officials involve almost half as much again.

Installed generating capacity in Australia has grown dramatically since 1950:

Between 1950 and 1960 it grew by 165 per cent or 3,500 megawatts;

Between 1960 and 1970 it grew by 160 per cent or 8,400 megawatts; and

Between 1970 and 1980 it grew by 71 per cent or 10,000 megawatts.

In each case the decade growth has continued to rise. On the basis of current plans, installed generating capacity is expected to rise by a further 9,000 megawatts by 1985 and by a further 12,000 megawatts in the second half of the decade to reach about 45,000 megawatts by 1990. In this decade the increase in generating capacity is expected to be greater than in any previous decade or even in any previous two decades. In 1979, the Commonwealth in conjunction with New South Wales, Victoria, South Australia and Tasmania, established a committee of inquiry into electricity generation and sharing of power resources in South-East Australia. The main function of the inquiry is to examine the feasibility of a strongly integrated electricity supply grid in South-East Australia.

The Risks

Resources and energy-related developments have an immense potential for generating economic growth in this country and raising the standard of living of all Australians, but the realisation of this potential could be imperilled if appropriate policies are not pursued. I refer particularly to:

Our vulnerability to disruptions to supplies of crude oil and the need for appropriate energy policies to minimise risk;

The need for sound economic policies which will provide an economic environment in which the massive investments which will be required can be made with confidence; and

The need for unions to play a positive role in this development and to avoid the industrial unrest which might put at risk major investments by adding to costs and uncertainties and might prejudice Australia's image as a reliable supplier. The Commonwealth will continue to consult with the trade union movement in every effort to improve the industrial relations climate.

Energy Policy

The National Energy Advisory Committee has estimated that if we do not find more oil our selfsufficiency in naturally occurring crude oil is expected to fall from about 67 per cent today, to about 40 per cent in 1990, and to 10 per cent by the year 2000. In order to avoid increasing reliance on potentially unreliable overseas supplies of oil - which will often be at much higher cost - government policies need to be directed at reducing our dependence on crude oil and towards cushioning the effect in Australia of any external oil shock.

Import Parity Pricing

The cornerstone of our policy is the pricing of indigenous crude oil at import parity. When we introduced import parity pricing, we knew that it would not be popular; but we believed that it was right, and necessary for the future well-being of

Australia. Import parity pricing is vital to conserve our scarce supplies of? liquid fuels, to encourage exploration for oil and to assist the development of alternative sources of energy. This policy is clearly working.

The case for the policy is overwhelming:

It is vital that we should price our own supplies of oil at the value placed on them in world markets and not allow them to be used at artificially low prices.

If we were to allow our irreplaceable indigenous oil reserves to be squandered- used up - at unrealistically low prices, it would be an act of extreme selfishness towards our children. It would be easy enough to say 'You and I will use that oil cheaply today', but that would be making no preparation for our children and for the next generation in the years to come. We would then be required to make adjustments much harder, much more painful and much more difficult than any being asked of any Australian today. .

Only by pricing indigenous crude oil to reflect world prices can alternative sources of energy such as shale oil and ethanol become viable and thus contribute towards reducing our dependence on imported oil.

Because these developments will take time to - have their full effect we must begin to make the necessary adjustments on a wide scale now.

The choice we face is between paying realistic prices for petroleum products now or paying even higher prices later to producers in other countries when we may be unnecessarily dependent on expensive and uncertain supplies of imported oil. The degree of sufficiency we now have because of Bass Strait is important to Australia and it is important that we now make plans to make sure that in future years other Australians will have that same degree of independence and self-sufficiency.

The crude oil levy recovers for taxpayers generally a substantial part of the windfall profits which would otherwise accrue to domestic oil producers as oil prices rise. Certainly it has assisted the Government to meet defence obligations which could not be postponed, to help reduce the deficit and to finance cuts in taxation applying from 1 July 1980. So, quite plainly, those additional oil revenues are working to the advantage of all Australians.

Notwithstanding our adherence to import parity pricing for indigenous crude, the price of Australian petrol is still amongst the lowest of all Organisation for Economic Co-operation and Development countries- the advanced Western countries. For example, prices in Europe range from 55c a litre in the Federal Republic of Germany to 62c a litre in the United Kingdom, which is also an oil producer, and to 78c a litre in Italy. Australia's import parity pricing is based on the prices set for 'Arabian light', the lowest price at which a major part of the world's oil is traded. In addition, the Government has backed up its pricing policy with supplementary measures to achieve its desired objectives to which I would now like to refer.

Energy Conservation

Conservation offers the most effective means of reducing our reliance on oil in the short term and has the potential for further gains as investments are made in energy efficient capital equipment, vehicles and buildings. Pricing of crude oil at import parity encourages conservation by ensuring that consumers make decisions based on realistic prices.

To encourage conservation, the Government launched last November a national energy conservation campaign; introduced a national industrial energy management scheme to promote and foster efficient energy consumption patterns in industry; and will be seeking a commitment from industry to establish and maintain energy management programs, under which companies will monitor energy use, establish goals for reducing energy use, and report this information through their industry association.

The available evidence suggests that, despite strong economic growth, consumption of petroleum products is slowing in Australia.

Inter-Fuel Substitution

Whenever possible the Government wishes to replace the use of petroleum products by other, more readily available substitutes. Again, of course, the prime incentive for such substitution is provided by realistic pricing of petroleum products arising from import parity pricing.

Natural gas, which is already available in all mainland capital cities, and in many other centres, provides an attractive alternative to crude oil products for many users. The Government is committed to extending natural gas pipelines to provide wider access to this energy source. Construction has commenced on a Sydney-Newcastle pipeline and will shortly commence on a line from Young to Wagga Wagga and Cootamundra. Plans have been approved for a spurline to Canberra and consultations are being held with New South Wales, Victoria, and South Australia on the possible extension of the southern lateral from Wagga Wagga to Albury. Such a line would link the Victorian and New South Wales gas distribution networks, and the Cooper Basin and Bass Strait gas fields.

In June last year I announced a number of initiatives to encourage the automotive use of liquefied petroleum gas. When it became evident that massive increases in the world price of LPG threatened this policy, the Minister for National Development and Energy (Senator Carrick) announced last April measures designed to restore an element of certainty to potential automotive users of LPG by tying the price of LPG to that of indigenous crude oil. These measures also recognised the position of household consumers of LPG by providing a temporary subsidy of $80 a tonne. This will give households the opportunity to switch gradually to more suitable indigenous fuels such as natural gas and electricity.

Alternative Sources of Liquid Fuels

The Government's import parity pricing policy provides a basic framework within which alternative fuels can be developed. The Rundle shale oil project is a classic example of the effectiveness of the Government's' import parity pricing policy. The developers of this project have made it clear that the Government's import parity pricing has been crucial in their decisions to make the very large investments required in this project - investments of a size that could make the North West Shelf appear to be almost modest in terms of its financial requirement. This emphasises that if we are to compete internationally for capital, expertise and skills, we will only attract these to Australia with rewards which are internationally competitive.

The first stage of the Rundle project is expected to cost between $300m and $400m in 1979 values and, if it is successful, to lead to a project costing many billions of dollars and producing about 200,000 barrels of syncrude a day- probably between 25 and 30 per cent of our expected requirements at that time. Its output should come on stream as Bass Strait oil production declines by the early 1 990s. If we are to maintain Australia's degree of independence, that merely underlines the importance of policies that will enable the Rundle investments to proceed in a reasonable and profitable way. Indeed, Rundle is likely to be the largest project ever undertaken in Australia and one of the largest in the world. Rundle, however, is only one of several rich oil shale deposits. If it proves to be viable it will almost certainly lead the way with its technology in the development of a great new industry for Australia, providing Australia with that important degree of independence and self-sufficiency.

Development work is being carried out to arrive at processes for the economic conversion of coal to oil. Joint ventures have been established by Australia with Germany and Japan to investigate these possibilities. Another promising alternative to crude oil is ethanol, which can be produced from a number of vegetable products such as grain, sugar cane and sugar beet. It has potential for use primarily as a petrol extender in blends containing 10-20 per cent ethanol. The Commonwealth Government is providing funding to assist in an economic and technical evaluation of the potential contribution of fuel ethanol to Australia's liquid fuel needs. Ethanol for use as an on-farm or transport fuel has been exempted from excise whether produced on-farm or commercially.

Research and Development

Research into alternative energy sources and other aspects of energy use is necessary to develop viable techniques to reduce our dependence on oil. The Commonwealth is providing increased funding for a substantial research and development program.

Petrol Exploration

The response by oil explorers to the Government's policies has been pleasing indeed. Confidence of investors has been restored and exploration activity has increased dramatically. Import parity pricing has, of course, provided the certainty as to future returns which has underpinned this recent expansion in oil search activity. For example:

The Australian Petroleum Exploration Association now expects that expenditure on petroleum exploration and development will exceed $71 5m this year compared with $150m in 1975.

Last year, 108 exploration and development wells were drilled in Australia and in 1980 it is expected that 121 such wells will be drilled. Only 29 wells were drilled in 1975.

Security of Oil Supplies

The Government has been concerned to provide greater security of supply of petroleum products to Australian consumers. In the event of a major interruption to oil supplies we would need to have adequate stocks of both crude oil and petroleum products. Our greatest protection against disruption in international oil markets is continued production from Bass Strait. The Government considers that a prudent objective for stock holdings in Australia is the equivalent of about 75 days of total consumption of crude oil and petroleum products. To put this objective into perspective, at the beginning of 1979 stocks of crude oil and petroleum products in Australia were equivalent to about 52 days consumption. They have now risen to 67 days, and discussions are being held with the oil industry to increase these stocks to the target level.

Member countries of the IEA are required to hold a minimum level of stocks equivalent to 90 days of net oil imports in the previous year. Australia easily complies with this requirement. Our oil and gas production facilities in Bass Strait and the associated onshore facilities in Gippsland meets some 62 per cent of our domestic oil consumption and all Victoria's natural gas requirements. The Government has taken action in consultation with Victoria and with ESSO to enhance the security of these installations and to enable more rapid restoration of supply in the event of disruptions. The Government is acting to reduce further the risks of accidental collision by vessels with the offshore installations. On 6 June, the Minister for Defence (Mr Killen) announced that increased surveillance and related activities were being undertaken by units of the Australian Defence forces, including naval and air units, in the vicinity of the Bass Strait production platforms.

Economic Conditions

Sound economic management is of great importance to the realisation of Australia's great development potential. Continued downward pressure on inflation and the avoidance of destabilising imbalances in the economy are prerequisites for the very large investments required. The Government's record in this area is good and the recent Budget demonstrates our resolve to continue to pursue anti-inflationary policies. The Government's foreign investment policy is understood and accepted not only by foreign investors but also from the wider Australian community.


Mr Young - That is not in your speech.


Mr MALCOLM FRASER - I am glad that the honourable member is following it so closely. It ensures consistency, equity and predictability for investors, while ensuring that Australians get maximum benefits from developments.

Industrial Relations

Planning, development and operation of major projects involving the investment of very large sums require reasonable certainty about costs and timetables. Delays arising from industrial unrest which could adversely affect both costs and timetables must therefore be avoided. We also need to avoid industrial unrest in the production phase particularly in the mining sector, as disruption to supply can be a source of concern to our trading partners, as well as to prospective investors. An essential component of Australia's image as a reliable trading partner is our ability to meet contracts as scheduled. The Commonwealth will encourage consultation and co-operation between management and workers in an effort to reduce the level of disputation and to provide a constructive industrial relations environment.

Achievements and Prospects

Events of the past 1 2 months confirm that the Government's strategy is working:

In 1979-80 consumption of petrol declined by 0.7 per cent, compared with a average annual increase of 4.6 per cent in the five years preceding full import parity pricing; In 1979-80 consumption of heating oil and fuel oil fell by 36 per cent and 8 per cent, respectively, over 1978-79; Introduction of natural gas into Sydney is estimated to have saved the equivalent of 2 million barrels of oil in 1979; Esso and the Rundle partners have announced that they have signed heads of agreement to develop the huge Rundle oil shale deposit; Exploration for oil has increased dramatically since the mid-1970s.

The latest survey by the Department of Industry and Commerce has identified investment of $29 billion, either committed or in the final feasibility stage, in major resource and manufacturing projects, with some two-thirds being energy related. Investment in electricity generation and transmission exceeding $19 billion over the next decade has been foreshadowed.

The policies being pursued by the Commonwealth will create the conditions which encourage the massive investments necessary to bring the potential resource-based developments to fruition. The investment of many billions of dollars in resource based developments will stimulate economic growth and employment. This investment, the growth of great new industries and the expansion of others will mean increased incomes and higher living standards for Australians. This exciting prospect has relevance for all of us; we all stand to participate in it. Our energy policies are firmly established and their success is already evident. The Commonwealth will continue to build on these policies to ensure that Australia is well placed to meet possible upheavals in the international oil markets. The measures I have outlined this afternoon provide evidence of this determination. Mr Speaker, in the statement I have made, I have provided an outline of the Government's energy policy and the prospects for resource development. For the information of honourable members I seek leave to incorporate in Hansard a somewhat fuller statement.

Leave granted.

The statement read as follows -

STATEMENT OF ENERGY POLICY AND RELATED RESOURCE DEVELOPMENT

Introduction

1   . In June of last year I outlined the Government's response to the existing energy situation. The measures adopted by the Government, particularly the pricing of indigenous crude at import parity had four main objectives: To encourage conservation of scarce sources of energy, particularly liquid fuels; to promote the switching out of oil into available alternate energy sources - mainly natural gas, LPG, and coal fired electricity; to increase oil exploration activity and maximise the development of existing fields; to stimulate commercial development of major new energy projects in areas such as shale oil, coal liquefaction, ethanol and methanol.

2.   That statement was made against the background of rapidly rising oil prices and uncertain supplies of imported crude. Over the past 14 months oil prices have risen further but for the time being at least imported supplies of crude have become more plentiful.

3.   The changes that have occurred in this period reinforce the wisdom of the Government's basic energy policies. Despite the success of these policies, and the current easing in the international oil situation, the Government is conscious of the large uncertainties attaching to future events in this area and in the past 12 months further measures have been introduced to reduce Australia's vulnerability to disruptions in world oil supplies.

4.   Other countries, too, have been adjusting to the effects of rapid increases in crude oil prices. This has led to a dramatic increase in the demand for the energy resources with which Australia is richly endowed. It has provided Australia with great opportunities.

S.   Australia's objective must be to make the most of those opportunities, while continuing to reduce our vulnerability to disruptions of world oil supplies.

6.   To realise our potential we must provide an environment within which very large investments can be made with confidence and the Australian community will share in the benefits. We must be seen by our trading partners as a reliable source of supply. This calls for a stable, well managed economy, for laws and their administration which are seen to be consistent and fair; and for co-operation between management and workers in the construction and operation of major projects.

7.   1 cannot stress too strongly the need for responsibility in industrial relations. Nothing could so harm our prospects as industrial disputes which escalate costs, which introduce uncertainties into investment decisions and which destroy the confidence of customers in our reliability as a supplier.

8.   If we adopt sound and responsible policies Australia can expect to do well in the 1 980s and beyond.

World Oil Situation

9.   Despite production cut-backs by some producing countries and a sharp drop in exports from Iran, stocks have greatly improved and the world oil supply is currently adequate to meet demand. But we should not be complacent.

Although the oil market has eased over recent months, the prospects for the future continue to give cause for serious concern. Supplies are partly dependent on the political stability of oil exporting countries.

10.   Over the foreseeable future, OPEC production is unlikely to increase significantly beyond its present levels. Competition for that oil is likely to grow. Increasing demand from the OPEC countries themselves and from developing countries will reduce the availability of oil to the western industrialised countries. Some observers expect that the Soviet Union may also become a net importer of oil before the end of the decade.

11.   There are also important changes underway in the structure of the world oil market. The role of the major oil companies in the distribution of oil has declined sharply. OPEC Governments now market more than half their oil directly. The involvement of producer Governments has in some cases introduced political considerations into the terms of contracts.

12.   Even on relatively optimistic scenarios for future production and consumption, the prospect is for further increases in oil prices. In the preparations for the Summit meeting in Baghdad in November, member governments of OPEC are currently considering proposals which would provide for regular indexed price increases.

1   3. The recent measures by some OPEC members to protect price levels by reducing production was an important development. This may well mean that future price increases may be associated with lower levels of production.

14.   The energy problem is a global problem. Failure to make appropriate adjustments or a lack of investment in energy supply would mean for the industrialised countries lower growth, higher unemployment and inflation.

15.   For the poorer developing economies higher energy prices, and the associated lower levels of growth in the major economies, can mean poverty and starvation; it can put selfsustained growth beyond reach. For the newly industrialised countries energy costs threaten their economic prospects and add to their debts.

16.   Energy is the issue which underlines the interdependence of our economies. Finding a way of reconciling the interests of the oil producing and consumer countries - developed and developing- will be a major challenge over the decade ahead.

17.   What is clear is that sustained economic growth in the remainder of the century will require further major changes in the Western world's energy usage patterns. In addition, there are risks that there will from time to time be further major disruptions to supplies.

1   8. Australia is participating in discussions on energy with our industrialised partners within the International Energy Agency. The IEA has emphasised the need for measures to reduce levels of imports, to use oil more effectively, and to develop alternative energy sources. There is overwhelming agreement within the IEA that domestic oil prices must reflect fully movements in internationally traded oil prices.

19.   Taking up agreements reached in the IEA, the Venice Economic Summit in June agreed on a strategy to reduce dependence on crude oil. Under this strategy maximum reliance is to be placed on the price mechanism. The strategy adopted represented a full endorsement of Australia's energy policies especially our crude oil pricing policy. The seven heads of government also urged measures to increase substantially the production and use of alternative energy resources, especially coal and uranium.

20.   Rising crude oil prices, the risks of further disruptions to supply, the desirability of diversification of sources of supply away from regions where there are high political risks of one sort or another, and the explicit policies of the kind just referred to all have the effect of pushing up prices of, and adding to the demand for, other sources of energy. This is already evident in the case of coal, LPG, and LNG - with which Australia is well endowed.

Australian Situation - The Opportunities

21.   The two dominant factors in the Australian situation are our partial - and declining - self-sufficiency in naturallyoccurring crude oil and our abundant reserves of other energy resources, especially coal. Of the 24 OECD countries, we are one of only five that are net exporters of energy.

22.   Australia's position is one of considerable opportunity, but at the same time of some risk. Our energy resources, combined with abundant supplies of many raw materials, create the opportunity for a large expansion in energy exports and in energy intensive resource developments.

23.   These developments will add greatly to our national product, to incomes and to wealth. Initially it will be the direct impact of the new resource development projects which will be most obvious as new job opportunities are opened up by the projects themselves and in the industries directly servicing them. But all Australians stand to benefit from the increased wealth which will flow from resource development. The higher incomes will be spent, this will in turn lead to new demands for a wide variety of goods and services and create opportunities for us all to realise our own individual potential in many differing fields of activity. Indeed our whole history has shown, starting from the pastoral developments in the 1 830s and the gold rushes of the 1 850s to the mineral boom in the 1960s that the benefits of economic growth will always expand far beyond those directly involved. All sections of our society will be able to share the gains from the developments which are in sight.

24.   However, this potential could be put at risk by a number of factors. Our partial dependence on imported crude oil leaves the economy vulnerable to major disruptions to world oil supplies. We must also ensure that our economic policies create the necessary pre-conditions to foster the large investments involved and that our potential is not undermined by industrial disputes.

25.   Higher oil prices and uncertainty about supplies have stimulated interest in Australia's abundant raw materials and large reserves of other energy forms, particularly coal. This is illustrated by: increased interest in and demand for direct exports of energy sources from Australia - primarily coal but also LNG increased desire to process Australian raw materials in Australia especially where the processing is energy intensive; accelerated plans to increase coal-based electricity generating capacity in Australia, to provide both the power to service raw material processing industries, and to cater for a shift out of petroleum products towards electricity as a preferred energy source.

26.   The developments in prospect will, of course, need to comply with Government requirements in areas such as the environment, foreign ownership, and taxation. We are determined that all companies, both domestic and foreign owned, shall operate in Australia's interests and in the interests of all Australians.

Energy Exports

27.   The fact that much of the output of Australian resource-related projects is exported underlines the need for Australia to be seen to be a reliable supplier on terms which are fair and equitable to both buyer and seller.

28.   Australia recognises and appreciates its responsibilities in this area in our present age of increasing world energy shortage. Our rich resource endowment carries with it an international responsibility to make our resources available on fair terms and conditions to countries who are less well endowed than ourselves. Developed and developing countries alike are vitally dependent on stable and secure supplies of resources for their economic advancement and well being. In turn, Australia expects consuming countries to provide stable access to their markets for our resources by way of long term contracts - whether in processed or unprocessed form. This is absolutely essential if companies are to commit the huge amounts of risk capital which are necessary to bring Australia's resource projects on stream in the 1 980s.

Coal

29.   Australia's greatest energy resource is coal, which comprises over 80 per cent of our identified economic energy resources. Coal currently provides 70 to 80 per cent of the country's electricity and in addition is a major and rising export product. In the period since 1960, annual exports of coal have risen from 1.9 million tonnes to 41.3 million tonnes in 1979. Most of this is coking coal, but a growing proportion is steaming coal for electricity generation.

30.   These exports are expected to increase significantly. For example, the IEA recently predicted that Australia's steaming coal exports could be expected to reach 35-40 million tonnes annually by 1990, compared with about 6 million tonnes at present.

31.   In terms of coal availability Australia is well placed to meet the increasing demand. The main challenge will be in planning for and coping with the necessary rail, road and port infrastructure needs and the associated need for skilled labour. Plant and equipment requirements will also be significant and pose increasing demands on our manufacturing sector.

32.   The Commonwealth is concerned that potential developments should not be held back by lack of necessary infrastructure. The Commonwealth, in conjunction with New South Wales and Queensland, is assessing the likely timing and size of future demands for coal exports and is examining whether current proposals for infrastructure will be sufficient to accommodate the likely growth in exports.

33.   Projects involving borrowings amounting to around $228 million to provide coal export facilities have already been approved by the Loan Council under the Infrastructure Program. In addition, the Loan Council has approved borrowings of $182 million for up-grading and electrification of the Waterfall-Port Kembla railway, primarily to facilitate haulage of coal to the new loader at Port Kembla. Possible infrastructure borrowings to finance electrification of other coal railways are under consideration.

LNG

34.   Plans for the North West Shelf Project are firming up, with arrangements for the Joint Venturers to supply natural gas to Western Australia in (984 and to commence exports of LNG in 1986.

35.   In accordance with its previously announced policy for the North West Shelf Project, the Government granted in November last year long term export permits for the export of LNG and, subject to the requirements of the domestic market, of LPG. The export permits provide the necessary basis for the negotiation of firm long-term contracts with overseas customers. These were necessary formal Government approvals to enable this great project to proceed.

36.   The major technical studies on the Project were completed by the Joint Venturers during 1979 establishing that development on a commercial basis would be possible. The participants are now drawing together complex matters relating to construction, marketing and financing with the intention of making final investment decisions as soon as possible. The Joint Venturers have already demonstrated their confidence in the Project by letting contracts for construction of some of the facilities, including the major contract for the jacket section of the first offshore production platform, and arranging the borrowings to finance development of the Project including a $ 1 .3 billion loan raised by Woodside Petroleum Ltd.

Uranium

37.   Australia contains around 1 6 per cent of the western world's low cost reasonably assured uranium reserves. Although anticipated growth of nuclear power programs in some countries has been reduced in the last few years, there are signs that the contribution which nuclear power can make to energy needs is being reassessed in the light of the overriding priority of reducing reliance on crude oil. At the Venice Summit, to which I have already referred, the leaders of the largest industrialised nations affirmed that they will seek enhanced use of nuclear power in the future.

Raw Material Processing

38.   In addition to vast reserves of many energy forms, especially coal, Australia has good reserves of many raw materials, including bauxite, iron ore, zinc, nickel and petrochemical feedstock.

39.   As the cost of oil continues to rise, it is becoming increasingly attractive to process raw materials in Australia in preference to transporting them to other countries where energy costs are higher or where there is a doubt about the availability of the required energy.

40.   Of prime importance is the availability in Australia of low cost coal-based electricity. The combination of low cost energy' and plentiful supplies of raw materials has increased the opportunities for the economic processing of raw materials in Australia. A further factor has been rising transport costs, particularly for bulky items.

41   . The most outstanding example here is aluminium smelting. Annual smelting capacity is expected to expand from 280,000 tonnes at present to about 1.3 million tonnes over the next five years. This will require investment of around $2.9 billion. Other aluminium projects under serious consideration could lift annual capacity to over two million tonnes in the second half of the 1980's, bringing total potential investment in the industry to around $4.5 billion.

42.   In addition substantial new facilities are planned for the petrochemical industry, based primarily on hydrocarbon feedstock material from Bass Strait and the Cooper Basin.

43.   Quite apart from our favourable energy and raw material resources endowments, our economic and political stability is a key element in Australia being a favoured location for resource-based processing projects.

Electricity

44.   Investment in additional electricity generating capacity represents one of the greatest development challenges in Australia.

45.   Because Australian electricity is produced primarily from coal we have been spared the very large increases in electricity prices being experienced in countries dependent on oil for power generation.

46.   The prospective availability of large quantities of relatively inexpensive coal-based electricity has generated interest overseas in locating energy-intensive industries in Australia.

47.   Recognising the very high cost of, and long lead times associated with the construction of electricity generating stations, the Commonwealth has taken a series of initiatives to encourage and assist the State authorities concerned.

48.   The Commonwealth has encouraged the States to bring forward proposals for coal-based electricity projects to be financed under the Infrastructure Program specifically to facilitate the provision of public sector infrastructure required to complement the big prospective increase in private sector investment in developmental projects.

49.   Borrowings of S3 billion have been approved under the Infrastructure Program for electricity generating projects with an estimated total cost of S7.4 billion.

50.   The borrowings for electricity projects which have been approved under the Infrastructure Program are: $774m for Eraring and Bayswater power stations in New South Wales; $ 1,076m for the Loy Yang A and B power stations in Victoria, and, in addition; $460m for power stations in Queensland;

SI 45m has been approved for the Northern Power Station in South Australia; $4 14m for power projects in Western Australia;

SI 13m for hydro-electric power works in Tasmania.

51.   There are, in addition, further electricity generating projects proposed, including those by New South Wales and Queensland for which total borrowings of about $4.4 billion are being sought towards outlays of S9.1 billion. These proposals are currently being examined by Commonwealth and State officials. Further proposals from other States have also been foreshadowed.

52.   It is difficult to convey the magnitude and importance to Australia of these developments. Projects already approved will add 40 per cent to Australian electricity generating capacity by about 1990. The proposals from New South Wales and Queensland currently being examined by officials involve almost half as much again. Installed generating capacity in Australia has grown dramatically since 1 950: between 1950 and 1960 it grew by 106 per cent or 3,500 megawatts; between 1960 and 1970 it grew by 150 per cent or 8,400 megawatts; between 1970 and 1980 it grew by 70 per cent or 10,000 megawatts;

On the basis of current plans installed generating capacity is expected to rise by a further 9,000 megawatts and by 1985 by about 12,000 megawatts in the second half of the decade to reach about 45,000 megawatts by 1990. In this decade the increase in generating capacity is expected to be greater than in any previous decades or even two decades.

53.   In 1979, the Commonwealth in conjunction with New South Wales, Victoria, South Australia, and Tasmania, set up a Committee of Inquiry into Electricity Generation and Sharing of Power Resources in South-East Australia. The main function of the Inquiry is to examine the feasibility of a strongly integrated electricity supply grid in South-East Australia.

The Risks

54.   Resource and energy related developments have an immense potential for generating economic growth in this country and raising the standard of living for all Australians.

55.   However, realisation of this potential could be imperilled if appropriate policies are not pursued. I refer particularly to: our vulnerability to disruptions to supplies of crude oil and the need for appropriate energy policies to minimise risk; the need for sound economic policies which will provide an economc environment in which the massive investments which will be required can be made with confidence; and the need for unions to play a positive role in this development and to avoid the industrial unrest which might put at risk major investments by adding to costs and uncertainties and might prejudice Australia's image as a reliable supplier.

Energy policy

56.   As I mentioned earlier Australia's partial selfsufficiency in crude oil leaves us vulnerable to disruptions in world oil supplies. The oil shocks of the 1970s, from which fortunately Australia was spared the worst effects, illustrate the dependence of Western economies on reliable supplies of crude oil.

57.   The National Energy Advisory Committee has estimated that if we do not make additional crude oil discoveries our self-sufficiency in naturally occurring crude oil is expected to fall from about 67 per cent today, to about 40 per cent in 1990 and 10 per cent by the year 2000. In order to avoid increasing reliance on potentially unreliable overseas supplies of oil Government policies need to be directed at reducing our dependence on crude oil and towards cushioning the effect in Australia of any external oil shock. We must reduce our dependence on oil as a fuel, find additional oil deposits in Australia, and develop alternative energy sources.

Import Parity Pricing

58.   The cornerstone of our policy is the pricing of indigenous crude oil at import parity. The Government's firm commitment to this policy was again illustrated recently with the decision to increase indigenous crude oil prices by $2.73 a barrel from 1 July to fully reflect changes in the price of Saudi crude since the beginning of this year.

59.   When we introduced import parity pricing policy we knew that it would not be popular; but we believed that it was right, and necessary for the future wellbeing of Australia. Import parity pricing is vital to conserve our scarce supplies of liquid fuels, to encourage exploration for oil and to assist the development of alternative sources of energy - this policy is clearly working.

60.   The case for the policy is overwhelming:

The increases which have occurred in the world price of oil, and the further increases which are likely, represent a reassessment of the value of this scarce resource. It is vital that we should value appropriately our own supplies of oil and not allow them to be used at artificially low prices; if investment decisions by business and expenditure decisions by the community as a whole are to be on a sound long term footing, it is imperative that they be made on the basis of realistic energy prices. Otherwise, there is the risk that expectations as regards costs and returns will not be realised when the true price has inevitably to be paid for energy inputs; only by pricing indigenous crude oil to reflect world prices can alternative sources of energy, such as shale oil, and ethanol, become viable and thus contribute towards reducing our dependence on imported oil; these developments will take time to have their full effect in reducing our dependence on imported oil. That is why we must begin to make the necessary adjustments on a wide scale now, before our dependence on foreign oil reaches high levels; the choice we face is between paying realistic prices for indigenous petroleum products now or paying even higher prices later to producers in other countries when we may be unnecessarily dependent on expensive and uncertain supplies of imported oil; if we were to allow our indigenous oil reserves to be squandered at unrealistically low prices, it would be an act of extreme selfishness towards our children, adding to their vulnerability to disruptions to imported oil supplies and increases in oil prices; the crude oil levy recovers for taxpayers generally a substantial part of the windfall profits which would otherwise accrue to domestic oil producers as oil prices rise. The effect of this is to relieve the community of the need to pay higher taxes of other types. The community and taxpayers at large benefit from this policy; the receipts from the crude oil levy have assisted the Government to meet defence obligations which could not be postponed, to help reduce the deficit, and to finance cuts in taxation applying from 1 July 1980.

61.   Some sections of the community have argued that they should pay lower prices for petroleum products because of their productive activities. But if we were to move to a two tier pricing system most users would quickly seek to be in the lower tier and it would also slow the adjustment to realistic energy prices, including the prices of energy inputs for industry. It would seriously undermine the whole import parity pricing policy.

62.   Notwithstanding our adherence to import parity pricing for indigenous crude the price of Australian petrol is amongst the lowest of OECD countries- for example, prices in Europe range up to 78 cents a litre in Italy. Australia's import parity pricing is based on the price set for 'Arabian Light', the lowest price at which a major part of the world's oil is traded.

63.   The Government has backed up its pricing policy with supplementary measures to achieve its desired objectives. These include: measures to promote conservation of liquid fuels, particularly petrol; encouraging of inter-fuel substitution away from petroleum products, e.g. towards natural gas; encouraging the development of alternative sources of energy, such as development of the production of syncrude from shale and coal, ethanol from plants; encouraging of oil exploration; support for increased energy research, development and demonstration.

Energy Conservation

64.   Conservation offers the most effective means of reducing our reliance on oil in the short term, and has the potential for further gains as investments are made in energy efficient capital equipment, vehicles and buildings.

65.   Pricing of crude oil at import parity encourages conservation by ensuring that consumers make decisions based on realistic prices for the petroleum products which they use. This is increasingly occurring.

66.   For example in 1979-80 in spite of strong economic growth petrol consumption decreased by 0.7 per cent and the consumption of the major petroleum products was 1.5 per cent lower than in 1978-79. For the five year period to 1977-78 - i.e. proceeding the move to full import parity - the corresponding average annual increases were 4.6 per cent, and 3.9 per cent, respectively. In addition, in the first half of this year four-cylinder cars accounted for 65 per cent of the new vehicle market, compared with 56 per cent in the corresponding period of 1979 (and 39 per cent in 1972). Further savings will result from the voluntary fuel improvement goals recently agreed with the motor vehicle industry.

67.   In co-operation with most State Governments, the Commonwealth launched last November a national energy conservation campaign. The program was continued in this year's Budget following the results of a survey which indicated that the campaign had a significant effect in increasing awareness of the need to conserve energy.

68.   There is scope for energy conservation in Australian industry. International estimates suggest that energy savings averaging 20 per cent can be achieved within five years with up to 40 per cent savings in particular cases, mainly through 'good housekeeping'.

69.   In recognition of the important role of energy conservation in industry the Government announced in this year's Budget the introduction of the National Industrial Energy Management Scheme to promote and foster efficient energy consumption patterns in industry.

70.   The Productivity Promotion Council of Australia has also undertaken six pilot Energy Productivity Achievement Programs to date resulting in first year savings estimated at over Sim. In this regard, the Government will be seeking a commitment from industry to establish and maintain energy management programs, under which companies will monitor energy use, establish goals for reducing energy use, and report this information through their industry associations. I call on industry leaders to give full support to this program.

71.   As foreshadowed in my Statement of 27 June 1979 the Government conducted a preliminary survey of all portfolios to ascetain liquid consumption patterns, conservation efforts undertaken by departments, and identify areas to seek additional savings.

72.   The initial responses indicated that many Commonwealth departments and agencies had already introduced some important conservation measures in their transport operations, buildings, factories and other plant. For instance, the purchase and use of 6 cylinder and larger vehicles are subject to stringent criteria and the proportion of 4 cylinder cars in the Commonwealth car fleet has increased from 1 5.3 per cent in 1976-77 to 34.2 per cent in 1978-79. This trend will continue as more cars fall due for replacement.

73.   The Commonwealth has commenced a program of converting Government houses in the ACT from oil to electric heating. In addition, any new public housing in the ACT will in future be constructed in accordance with thermal efficiency guidelines.

Inter-fuel Substitution

74.   Whenever possible the Government wishes to replace the use of petroleum products by other, more readily available substitutes. Again, of course, the prime incentive for such substitution is provided by realistic pricing of petroleum products arising from import parity pricing.

75.   Demonstrated economically recoverable reserves of natural gas (including the North West Shelf) are about 700 billion cubic metres compared with Australian consumption in 1979 of 9 billion cubic metres. Major gas production presently occurs in Bass Strait and the Cooper Basin, with smaller producing areas in Queensland and Western Australia. All mainland State capital cities are supplied with natural gas, and pipeline systems are being extended.

76.   Natural gas provides an attractive alternative to crude oil products for many users. The Government is committed to extending natural gas pipelines to provide wider access to this energy source. The recent penetration of natural gas into the Sydney market is particularly heartening.

77.   Construction has commenced of a Sydney-Newcastle pipeline and will shortly commence on a line from Young to Wagga Wagga and Cootamundra. Plans have been approved for a spur line to Canberra and consultations are being held with NSW, Victoria and South Australia on the possible extension of the Southern lateral from Wagga Wagga to Albury. Such a line would link the Victorian and NSW gas distribution networks, and the Cooper Basin and Bass Strait gas fields.

78.   In June last year 1 announced a number of initiatives to encourage the automotive use of LPG. At the moment most of our naturally occurring LPG is exported and it is the Government's aim that his valuable fuel be used increasingly in Australia to replace imports of crude oil.

79.   Earlier this year, it became evident that massive increases in the world price of LPG threatened this policy. High prices for LPG, but more importantly uncertainty about future price movements, coupled with fears about safety standards, had adversely affected the demand for automotive LPG conversions.

80.   The policy announced by the Minister for National Development and Energy last April is designed to restore an element of certainty to potential LPG users by tying the price of LPG to that of indigenous crude oil. In this way people could be assured that the benefits from conversion would not be eroded by increases in the price of LPG larger than those for crude oil.

81.   Our policy also recognised the position of household consumers of LPG by providing a temporary subsidy of S80 a tonne to be paid through wholesale distributors. This will give households the opportunity to switch gradually to more suitable indigenous fuels such as natural gas and electricity.

82.   The success of the Government's policies aimed at encouraging substitution is clear from the 1979-80 consumption figures for selected products; for examplefuel oil consumption was down 8 per cent; industrial diesel fuel consumption was down 1 5 per cent; and heating oil use was down 36 per cent. Alternative Sources of Liquid Fuels

83.   With increasing prices for crude oil, there has been a dramatic increase in the prospects of developing alternative sources of liquid fuels which will be competitive economically with crude oil. The Government's import parity pricing policy provides a basic framework within which alternative fuels can be developed.

84.   Australia has extensive deposits of oil shale. A large, high grade deposit, known as the Rundle Deposit, is located near Gladstone in Eastern Queensland. Other very large rich deposits have also been indentified over a wide area of Queensland and Northern New South Wales.

85.   The Rundle shale oil project is a classic example of the effectiveness of the Government's import parity pricing policy. The developers of this project have made it clear that the Government's import parity pricing has been crucial in their decisions to make the very large investments required in this project.

86.   An agreement, recently signed between the Rundle partners and Esso, provides for the completion of the first stage of a project to produce up to 20,000 barrels of oil a day by 1985 and, if this is successful, subsequent development to produce about 200,000 barrels a day in the early 1990s. This syncrude output which should come on stream as Bass Strait oil production declines will be equivalent to between 25 and 30 per cent of our expected requirements at that time.

87.   The first stage of the project is expected to cost between $300m and $400m in 1 979 values; and if it is successful to lead to a project costing many billions of dollars. Indeed it is likely to be the largest project ever undertaken in Australia, and one of the largest in the world.

88.   Rundle is only one of several rich oil shale deposits. If it proves to be viable it will almost certainly lead the way with its technology in the development of a great new Australian industry.

89.   Developmental work is being carried out to arrive at processes for the economic conversion of coal to oil. Joint ventures have been set up by Australia with Germany and Japan to investigate these possibilities.

90.   The joint Australian/FRG coal-to-oil feasibility study estimated to cost about $4m will report in mid-1981 on the feasibility of establishing liquid fuel plants at nominated sites in New South Wales, Queensland, and Victoria.

91.   The Japanese Ministry of International Trade and Industry has expressed interest in joint development of the KOM1NIC solvent refining technology for liquefaction of Victorian brown coal. A decision on a pilot plant will be preceded by studies which will assess the KOMINIC technology in the context of competing coal liquefaction technologies and report on the feasibility of establishing pilot and commercial plants.

92.   Another potentially promising alternative to crude oil is ethanol which can be produced from a number of vegetable products such as grain, sugar cane and sugar beat. The Commonwealth Government is providing funding to assist in an economic and technical evaluation of the potential contribution of fuel ethanol to Australia's liquid fuel needs. This high octane fuel has potential for use primarily as a petrol extender in blends containing 10-20 per cent ethanol.

93.   In addition to funding research and development, the Government has introduced an Experimenters' Licence Scheme to permit working trials of small-scale fuel ethanol production and use, particularly on the farm. These trials will be of particular interest to farmers interested in small-scale production as a means of attaining fuel self-sufficiency. Some 39 licences have been approved to date.

94.   Ethanol for use as an on-farm or transport fuel has been exempted from excise whether produced on the farm or commercially. This exemption will apply at least until the commercial viability of large scale use or ethanol as an alternative fuel or a fuel extender has been established.

Research and Development

95.   It is clear that research into alternative energy sources and other aspects of energy use is necessary to develop viable techniques to reduce our dependence on oil. The Commonwealth is committed to a substantial research and development program. Apart from the ongoing programs of Commonwealth organisations, the National Energy Research, Development and Demonstration Program has provided additional stimulus to all sectors, across a wide range of energy technologies. Since its inception in 1978, in excess of $41. 8m has been committed in grants under the Program. In 1980-81, $ 13.5m has been provided for expenditure on the Program compared with $9.0m in 1979-80, an increase of 50 per cent. Total expenditure by Commonwealth organisations on energy research and development in 1979-80 was around $32m.

Petroleum Exploration

96.   The response by oil explorers to the Government's policies has been very pleasing. Confidence of investors has been restored and exploration activity has increased dramatically. Import parity pricing has, of course, provided the certainty as to future returns which has underpinned this recent expansion in oil search activity.

97.   A comparison with activity in 1975 when the Government came to office illustrates the industry responses:

The Australian Petroleum Exploration Association now expects that expenditure on petroleum exploration and development will exceed $7 15m in 1980 compared with $ 150m in 1975; last year 108 exploration and development wells were drilled in Australia and in 1980 it is expected that 121 such wells will be drilled- only 29 wells were drilled in 1 975; we now have twice as many exploration permits on issue as in 1 975- over 233 permits now compared with 1 22 then; in 1980, the amount of seismic work completed was more than six times the amount undertaken in 1975 (an estimated 50,000 tine kms compared with 7,800 line kms); at 30 June this year there were 20 active drilling rigs operating onshore and offshore in Australia. At the same time last year there were 10, and in mid-1975 there were only 4.

98.   Another indication of the success of our policies is the amount of oil which has been added to Australia's petroleum reserves.

Almost 1 billion barrels of oil have been added to Australia's economically recoverable reserves in the last four years, and at 31 March 1980 remaining reserves stood at 1 ,838m barrels which is a net increase after production of some 3 1 0m barrels over the period.

Security of Oil Supplies

99.   Particularly since the 1979 oil crisis, the Government has been concerned to provide greater security of supply of petroleum products to Australian consumers. 100. In the event of a major interruption to oil supplies we would need to have adequate stocks of both crude oil and petroleum products on which we could draw. The Government considers that an appropriate objective for stock holdings on land in Australia by the oil refining and production industry is the equivalent of about 75 days of consumption of crude oil and petroleum products. 101 . To put this objective into perspective, stocks on land in Australia were equivalent to about 52 days consumption at the beginning of 1979. They have now risen to 71 days. Discussions are being held with the industry to increase these stocks to the target level. 102. Member countries of the 1EA are required to hold a minimum level of stocks equivalent to 90 days of net oil imports in the previous year. Australia easily complies with this requirement. 103. One product area in which shortages were felt in 1979 was avgas. As a result of efforts to have Australia's avgas refining capacity increased:

Mobil is increasing the annual capacity of the Altona refinery from 40,000 tonnes to about 70,000 tonnes; and

Shell has decided to manufacture avgas at its refinery at Geelong in Victoria, and on 16 May 1980 commenced production at an annual rate of 70,000 tonnes. 104. Total refining capacity is now in excess of 140,000 tonnes per annum, well in excess of our traditional demand of about 100,000 tonnes. 105. Our oil and gas production facilities in Bass Strait and the associated onshore facilities in Gippsland meets some 62 per cent of our domestic oil consumption and all Victoria's natural gas requirements. The Government has taken action in consultation with Victoria and with the operators of the installations, Esso, to enhance the security of these installations and to enable more rapid restoration of supply in the event of a catastrophe. Further measures are in hand. 106. The Government is acting to reduce further the risks of accidental collision by vessels with the offshore installations. On 6 June the Minister for Defence announced that increased surveillance and related activities were being undertaken by units of the Australian Defence Forces, including Naval and Air units, in the vicinity of the Bass Strait oil production platforms. 107. The Government has established the National Petroleum Advisory Committee to advise it on suitable allocation arrangements that might be adopted in the event that any shortage arose.

Economic Conditions 108. Sound economic management is of fundamental importance to the realisation of Australia's great development potential. Continued downward pressure and the avoidance of destabilising imbalances in the economy are necessaary prerequisites for the very large investments required. The

Government's record in this area is good and the recent Budget demonstrates our resolve to continue to pursue antiinflationary policies. 109. The economic climate provided by the Government is essential in order that investors, both domestic and foreign, should have the confidence necessary to make decisions to invest the massive amounts of money involved in many of the potential resource and energy related projects. 1 10. The Government's foreign investment policy is understood and accepted by foreign investors. It ensures consistency, equity and predictability for investors, while ensuring that Australians get maximum benefits from developments.

Industrial Relations 111. The Commonwealth, in conjunction with State Governments, has adopted policies directed to providing the necessary environment within which the massive resource and energy-related investment can proceed with confidence. Planning, development and operation of major projects involving the investment of very large sums require reasonable certainty as regards costs and timetables. Delays arising from industrial unrest which could adversely affect both costs and timetables must therefore be avoided. It is in the interests of the workers and indeed all Australians, that the very favourable prospects for development which Australia now has before it should not be prejudiced by industrial unrest. 1 12. Unions must play their part so that their members can share in the benefits which the prospect of resource development holds out for Australia. There needs to be continuing consultation between unions, management and Government so that there is early and clear understanding of the features of proposed developments. 113. It is also vital that we should avoid industrial unrest in the production phase particularly in the mining sector, as disruption to supply can be a source of concern to our trading partners, as well as to prospective investors. An essential component of Australia's image as a reliable trading partner concerns it's ability to meet contracts as scheduled. 114. Minimal industrial unrest will greatly enhance our image overseas; it will spare workers and their families the effects of unnecessary losses of income which they rarely, if ever, recoup; and it will be in the interests of all Australians. It is essential if we are to maximise the benefits from our unique combination of energy and raw material reserves that the level of industrial disputation must be reduced. The Commonwealth will encourage consultation and co-operation between management and workers in an effort to reduce the level of disputation and to provide a constructive industrial relations environment.

Achievements and Prospects 115. Our experience of the past twelve months confirms that the Government's strategy is working: in 1979-80 consumption of petrol was 0.7 per cent less than in 1978-79, compared with an average annual increase of 4.6 per cent in the five years preceding full import parity pricing;

In 1979-80 consumption of heating oil and fuel oil fell by 36 per cent and 8 per cent, respectively, over 1978-79; consumers are showing a strong preference for cars with greater fuel economy leading to 4 cylinder cars holding 65 per cent of the vehicle market in the first half of this year compared with 56 per cent in the first half of 1979 (and 39 percent in 1972); introduction of natural gas into Sydney is estimated to have saved the equivalent of 2 million barrels of oil in 1 979;

The Esso and the Rundle partners have announced that they have signed Heads of Agreement to develop the huge Rundle oil shale deposit; coal-to-oil feasibility studies are underway, possibly leading to establishment of pilot plants; exploration for oil has increased dramatically from the low of the mid-70s;

Investment in electricity generation and transmission exceeding $19 billion over the next decade has been foreshadowed. 1 16. There has been an unprecedented interest in increasing raw material processing in Australia. The latest survey by the Department of Industry and Commerce has identified investment of $29 billion either committed or in the final feasibility stage in major resource and manufacturing projects, with some two-thirds being energy related. For example: exports of steaming coal are estimated to increase from 6 million tonnes at present to 35-40 million tonnes by 1990; annual aluminium smelting capacity is expected to increase from 280,000 tonnes at present to a possible capacity in excess of 2 million tonnes by 1990, earning some $2 billion export income at current prices. 117. The prospects are for continuing high interest in Australian energy exports and in establishing energy intensive industries in Australia. 1 18. The large scale investment of many billions of dollars in resource based development will stimulate economic growth and employment. It will provide greatly increased demand for our manufacturing industry, particularly the fabrication and construction sectors. It will also have favourable effects on transport and other service industries. 119. The policies being pursued by the Commonwealth will create the conditions which encourage the massive investments necessary to bring these potential developments to fruition. In addition the Commonwealth, in co-operation with State Governments, is acting to ensure that developments are not being impeded by lack of essential infrastructure. 120. Our energy policies are firmly established and their success is already evident. The Commonwealth will continue to build on these policies to ensure that Australia is well placed to meet possible upheavals in the international oil markets. The measures I have outlined evidence this determination.


Mr MALCOLM FRASER - I present the following paper:

Energy Policy and Related Resource Development - Ministerial Statement, 26 August 1980.

Motion (by Mr Garland) proposed:

That the House take note of the paper.







Suggest corrections