Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Address to the Gas Speak Colloquium 2012, Old Parliament House, Canberra



Download PDFDownload PDF

Minister for Resources and Energy, Minister for Tourism

Gas Speak Colloquium 2012 10 September 2012

Members Dinning Room 3, Old Parliament House, Canberra

* Check against delivery

Introduction

Good morning.

It is a pleasure to once again address the Gas Speak Colloquium here in Canberra.

At last year’s event, I reflected on a year of major investment in Australian natural gas developments.

I also highlighted the raft of new gas projects on the horizon and spoke of new policy arrangements and the gas market reform agenda.

I am happy to report that much of the foreshadowed production is now online or remains on track to proceed.

We also continue to see major improvements to the way the gas market in this country operates.

Today I will offer an update on some of these trends and issues and provide a snapshot of current challenges and opportunities for the gas sector.

Demand

I am firstly happy to report that the global market for natural gas has never been stronger.

The International Energy Agency has recently produced a significant amount of literature that points to impressive growth for many years to come.

The IEA in fact predicts that consumption of natural gas will approach or exceed that of coal by 2035.

Both conventional and unconventional supplies of gas are set to play an important role in the future energy mix.

Many countries, Australia included, see natural gas as a vital transitional fuel in creating a low carbon economy.

It is also a cheaper, safer and more reliable source of energy than many alternatives.

We are thankfully in an ideal position to continue catering to this demand.

We are one of just three net exporters of energy in the OECD and most of the global growth in energy consumption is occurring on our doorstep, in Asia.

This has seen new projects increasingly underwritten by agreements with customers in China, Japan and Korea.

Supply

Australian natural gas development has grown considerably on the back of this impressive demand.

The commencement of Western Australia’s Pluto LNG project in May this year increased our annual export capacity to more than 24 million tonnes.

Exports are forecast to grow by a total of 20 per cent this financial year as production from Pluto ramps up.

And the future looks equally bright, with more than 60 million tonnes of additional capacity currently under construction, to a value of $176 billion.

This includes 13 new production trains across three different production models:

• conventional LNG based on offshore gas ; • floating LNG; and • onshore coal seam gas to LNG.

There were final investment decisions for two major projects in the past year alone.

One is for a second train at the Australia Pacific LNG project, which utilises Queensland coal seam gas.

The other is for the Ichthys offshore project being developed in Darwin, which will feature one of the world’s longest large-diameter offshore pipelines, and a central processing facility also among the largest ever built.

National production capacity is expected to quadruple by 2017, with Australia remaining on track to become the world’s largest LNG exporter during this time.

One of the most notable trends within this wider development has been the rise of unconventional gas.

The coal seam gas sector has grown most sharply - becoming an integral part of energy supply in Queensland and other eastern states since its commencement in 1996.

Its share of national gas production grew from two to 11 per cent during the five years to 2010-11 alone, so that it now accounts for over 35 per cent of eastern states’ gas production.

Page 1 of 3 Gas Speak Colloquium 2012

30/07/2013 http://minister.ret.gov.au/MediaCentre/Speeches/Pages/GasSpeakColloquium2012.aspx

The construction of three coal seam gas to LNG projects is already underway in the Gladstone region, to a value of nearly $60 billion, with the Queensland Government estimating the sector could create 18,000 jobs at peak construction.

We may also now be witnessing the birth of an unconventional gas industry based on shale gas, with South Australia and Queensland’s Cooper Basin promising to be a valuable new energy resource.

It is still early days for Australia’s industry, but we can take heart from the fact that the shale gas revolution in North America has been more rapid and profound than any analyst or government expert predicted.

Tightening conditions

While certainly a cause for optimism, we must also recognise that high levels of activity can create significant pressures for industry, government and the community.

Development of new coal seam gas resources for the export LNG market has heightened concerns on the availability of gas for Australia’s own energy security.

This echoes the long-standing debate around offshore LNG development in Western Australia.

While there are adequate gas resources in the ground, the projected tightening of supply reinforces the need for efficient domestic gas markets supported by robust regulatory frameworks.

The Government firmly believes in allowing markets to adjust to new dynamics rather than intervening to constrain domestic prices or supply, which only ever leads to inefficient resource allocation.

The Council of Australian Government’s Standing Council on Energy and Resources, or SCER, has agreed we need national policy principles to ensure supply can flexibly meet market conditions.

This includes streamlining regulatory approvals to attract new investment in gas projects, to satisfy local demand.

The Government has already worked with industry to design and implement several reforms aimed at achieving the flexibility of which I have spoken.

For example, the National Gas Law provides a framework to ensure efficient gas sector investment, effective operation of pipeline services and regulation of networks.

The Gas Statement of Opportunities provides a forecast of supply and demand to help current and potential market participants identify opportunities to invest and manage their positions.

The Gas Market Bulletin Board also provides the market with a good measure of transparency.

And the gas Short Term Trading Market offers additional flexibility for buyers and sellers as well as heightened transparency once again.

SCER is furthermore considering a voluntary gas supply hub trading market to be first applied at Wallumbilla in Queensland - this would enhance reliability of supply through a low-cost and flexible method of transferring gas.

I’m confident these current and future reforms will allow us to balance the demands of the lucrative export LNG market with those of Australian houses and businesses.

Environment and safety

Another balance we must continue to strike is between ongoing development and protection of the environment and worker safety.

It is an Australian Government priority to create a clear understanding of the shared responsibility of governments, regulators, operators and the workforce in this respect.

The goal of responsible development applies as much to improving the competitiveness of the industry as providing industry with its social licence to operate.

A focus on shared responsibility was an outcome of the International Offshore Petroleum Regulators and Operators Summit hosted by Australia in August last year.

The summit provided a timely opportunity for governments, industry and regulators to review collective lessons from the Montara and Gulf of Mexico oil spills.

Since then, industry has worked towards establishing a global offshore petroleum industry capping solution, which could manage future loss of well control incidents.

Key to the responsible development of the offshore industry was the establishment of the National Offshore Petroleum Safety and Environmental Management Authority as a single national regulator.

The Government has also reviewed and considered improvements to the offshore regulatory regime.

Specifically, we are looking at ways to strengthen and clarify the ‘polluter pays’ principle.

This would provide a legislative guarantee that requires parties that are responsible for any hydrocarbon spills to meet the costs of responding, including the costs associated with cleanup and scientific monitoring.

We are also equipping our regulator with more effective tools to ensure compliance with the regime.

Onshore sustainability and safety is also firmly in the spotlight through the coal seam gas sector.

This is understandable given the rapid introduction of new technologies and the community’s initial unfamiliarity with these.

The Government appreciates these concerns and is working with the states and territories to create a national harmonised regulatory framework for the sector, to improve confidence.

This will address concerns such as water management and monitoring; well integrity and aquifer protection; and monitoring of hydraulic fracturing and chemical use.

The Government has also established a $150 million Independent Expert Scientific Committee to provide advice in relation to coal seam gas and large coal mining developments that could potentially affect water resources.

Page 2 of 3 Gas Speak Colloquium 2012

30/07/2013 http://minister.ret.gov.au/MediaCentre/Speeches/Pages/GasSpeakColloquium2012.aspx

New South Wales and Queensland have agreed to take the committee’s work into account when considering applications for new projects and the Government will publicly release the results of its investigations.

Great rigour is already applied to coal seam gas, with the recent approval of projects in Queensland attracting more than 1200 state and 300 federal conditions.

But industry still has a role to play in convincing community members that they operate in a manner that protects Australia’s environment and workers.

This includes effectively managing risks and openly communicating the reasons for taking certain decisions.

This will ensure a significant role for coal seam gas in Australia and the world’s future energy mix.

Energy White Paper

The Government’s Energy White Paper will address many of the issues I have outlined today and many more that are relevant to the gas sector.

I released a draft Paper in 2011, with the actual White Paper due to be published later this year.

The draft paper proposed four broad policy priorities to enhance Australia’s energy potential:

• Strengthening the resilience of our energy policy framework; • Reinvigorating the energy market reform agenda; • Developing our critical energy resources, particularly gas; and • Accelerating clean energy outcomes.

The White Paper is likely to retain these, while also taking into account views put forward during the consultation phase, as well as outstanding policy issues.

It will also update information on future gas reserves and development, electricity demand and fuel costs, as well as revise costs for electricity generation technologies.

The White Paper will outline the Government’s proposed directions on key energy issues, including:

• Improving productivity and competitiveness; • Smoothing the transition to a clean energy future; • Managing expected changes in and impact on the gas market; and • Maintaining ongoing liquid fuel security.

The Energy White Paper will be a strategic document that clearly outlines priorities for energy market development.

It will thereby provide investors, consumers and planners a clear sense of direction and confidence in Australia’s energy future, ensuring it is very bright indeed.

Conclusion

My overall position on the gas sector is one of confidence, with international demand rising and Australia’s conventional and unconventional supplies rising to meet it.

I also believe we have the right policy settings in place to address the issue of tightening east cost domestic gas supply.

The Government will continue to work with industry to improve market flexibility and efficiency.

Cooperation of this nature will likewise be critical to maintaining the gas sector’s management of the environment and worker safety, particularly in the still developing coal seam gas sector.

I encourage you all to consider these issues and to look out for the final version of the Energy White Paper later this year.

It will provide a clearer understanding of the task at hand for the gas and energy sector, anda vital blueprint for how we can effectively manage it.

Thank you.

Page 3 of 3 Gas Speak Colloquium 2012

30/07/2013 http://minister.ret.gov.au/MediaCentre/Speeches/Pages/GasSpeakColloquium2012.aspx