AUSTRALIAN Industry Minister Ian Macfarlane has pledged that the government would do whatever it took to guarantee Australia retained its attractive investment climate.
But, speaking to APPEA delegates in his first year back in the job, he conceded there was not much he could do to alleviate the looming gas shortage facing New South Wales in 2016.
Mr Macfarlane’s speech touched on Australia’s domestic gas challenges, international competition, cutting red and green tape and floating liquefied natural gas.
Australia has vast amount of untapped petroleum resources, but there was a need to make the business environment attractive for investment, he said.
“This is one thing the Australian Government is determined to get right,” he said.
“The government came to office on a platform of being open for business because we know business is the backbone of the Australian economy.”
On the domestic front, Mr Macfarlane highlighted that the start of LNG exports on the east coast was expected to see gas demand in the eastern gas market triple by 2016.
In terms of supply to meet that demand, New South Wales was facing some concerning shortfalls, he said, drawing comparaisons with Queensland.
While in Queensland there are 4,900 wells drilled and more than 29,000 people employed both directly and indirectly, in NSW there are 230 wells drilled and the latest figures show just over 200 people are employed in the industry.
“Facilitating new gas supply and an effectively operating market are critical to addressing the supply and market issues emerging in New South Wales,” he said.
In the absence of a coal seam gas industry, NSW faces a gas shortage from 2016. The consequences will be most significant for manufacturing and other industries that rely on gas for production, as well as for the jobs that rely on these industries, he said.
Speaking further on the issue to media following his address to delegates at APPEA, Mr Macfarlane said the industry was now past the point of being able to satisfy the gas shortfall in NSW in 2015 and 2016, particularly if the state experienced a cold winter in 2016.
“We just got to do with the issue as it is,” he said.
When asked how he was going to tackle the expected shortfall, he said he wasn’t sure what the government could do without risking the country’s sovereign profile.
While there was an option to prevent quantities of gas slated for export and shift them to fill domestic supply, Mr Macfarlane said that would “destroy everything that this county has worked for 150 years.”
“The short answer is there’s not much we can do and there’s not much we are prepared to do in terms of destroying our sovereign risk.
“The reality is it has to be solved in NSW.”
“If the gas is not there it’s not there.”
He reiterated it wasn’t an issue that had just come to light in recent months, but was one that was predicted many years ago, and foreshadowed at many APPEA conferences.
“Nothing that is happening now wasn’t predicted three years ago,” he said.
While he said he “wasn’t in that game” of providing assistance, he did not rule out providing an interim assistance package to the manufacturing industry in NSW which is expected to be one of the hardest hit by the forecast gas shortage and accompanying higher gas prices.
Commenting on the recent developments relating to CSG in NSW, Mr Macfarlane pointed to the recent memorandum of understanding signed between Santos and AGL Energy and the government which gives farmers veto rights over drilling.
While he had long advocated for NSW to look to the Queensland example, where gas companies and farmers have been working together to mutual benefit for more than a decade, Mr Macfarlane said it was no longer a case of saying do what Queensland has done.
“In a perfect world there wouldn’t be the need for this agreement in writing, given farmers and miners have a long history of working together without resorting to acrimony or court action,” he said.
“I think this agreement is a genuine effort to think outside the existing framework and take a non-conventional approach to get things moving.”
He said the challenge moving forward was for landowners and companies to work together co-operatively without resorting to court action.
“I have full faith that this can be done.”
Commenting on Australia’s LNG industry, he said the growth potential was enormous.
“If the forecast of more than 80 million tonnes of LNG exports per annum nationwide by 2017–2018 eventuates, Australia may become the world’s largest LNG producer,” he said.
Mr Macfarlane echoed the major theme of the event, saying Australia could not rest on its success.
“While these projects and others reflect Australia’s continued success as an LNG exporter, we can’t be complacent,” he said.
“Our competitors are fast catching up.”
Bringing his speech to the topic of FLNG, he said Australia’s potential to unlock stranded resources using the technology was huge.
He urged the industry not to miss the opportunities FLNG presented.
“Twenty years ago, Australia missed the boat by not being at the forefront of changing technology with FPSOs,” he said.
“We will not make that mistake again.
“Innovations in floating LNG have the potential to bring previously stranded offshore acreage into consideration for release and development,” he said.
“Unlocking these fields will broaden Australia’s resource base and present industry with new development options.”
Mr Macfarlane trumpeted the wider economic benefits of FLNG, which include more long-term jobs, as well as higher skills.
“By taking the early lead on it now, Australia can become a world leader in operating and maintaining floating LNG vessels,” he said.
In closing, Mr Macfarlane gave a upbeat assessment of the country’s prospects, adding Australia had the potential to become an energy leader and the world’s largest LNG producer.
“We are consolidating our place as an energy and resources superpower,” he said.
“We must work together to tackle the domestic and international challenges we face, to improve the competitiveness of our energy industry.”