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Doorstop interview

19 July 2019

Subject: Hydrogen Energy Supply Chain project, Japan and employment.


Minister Canavan: It’s great to be here in Victoria to celebrate the start of what is a world first project. This project builds on the best of our past to create our future. Creating a better future with relations between Australia and Japan, building on what we’ve well between our two countries in the past, which is to develop our resources to create jobs in Australia and create opportunities in Japan with the use those resources as well; to build on our past of world’s best science, we’ve always been at the cutting edge of, particularly in the resources sector, where we lead the world with a frontier of development in resources and energy in Australia. And here, for the first time in Victoria, going to build a liquefaction facility for hydrogen, it’s a fantastic example of Australian scientists kicking goals on the world stage. And of course it's also fantastic to see the development of our resources to create jobs here in Victoria. The brown coal of the Latrobe Valley has helped develop Victoria, helped create a manufacturing powerhouse here in Victoria; it’s the strongest manufacturing state in our country. I want to see that continue, and grow, and develop. And it's only through the development of our own Indigenous economic resources that we're going to maintain the strong manufacturing jobs we have here in Victoria. So it’s great to see a new life being given to those brown coal resources to create jobs in Australia too. I’ll let Simon say a few words and then we’ll take questions.

Senator Birmingham: Well thanks, Matt, through the export of coal, iron ore, LNG, Australia has been fueling industry in Japan for decades, and we see hydrogen as a potential for us to keep fueling Japanese industry for decades to come, and industry elsewhere around the globe. And what that means is the potential for billions of future in export dollars and many jobs supported across Australia should this pilot project be a success. What we want back here is the fact that we have ingenuity, innovation, exploring new energy potential, using old traditional fuels that can support communities that have served Australia so well for years to come.

Japan is one of Australia's key export markets, one of our key investment partners. And today, we see in this project that investment continuing to hopefully fuel billions in future exports into the future. Hydrogen is a real potential energy source in the future. This project is being pursued because of the clean energy potential behind it. But the very exciting thing for Australia, and especially for communities like the Latrobe Valley, is that it can preserve and continue the jobs and opportunities in those traditional mining sectors while giving us a new energy resource for the future.

Happy to take questions.

Question: A hundred-million-dollars for something that’s going to run 12 months; that’s a lot of cash. Why is that worth it?

Senator Birmingham: There are billions of dollars of potential exports for the future, thousands of potential jobs in the future if this pilot project can be proven to be technologically feasible and commercially feasible. And we've got to make sure that we invest in the future of Australia continuing to be a key reliable, affordable energy supplier to the world because that’s what's underpinned our prosperity to date and it's what can deliver future prosperity in the future.

Question: When exactly do you anticipate that you'd have a time where you’d be like: right, we can set up an industry if this works.

Senator Birmingham: Well, there are commercial realities to this and that's why it's so critical that this project is being driven by a range of commercial partners, led by Kawasaki Heavy Industries out of Japan. They will make commercial decisions. It's not the only aspect of hydrogen technology being explored in Australia. And we're delighted that Dr Alan Finkel, Australia's Chief Scientist, is leading work developing a national hydrogen strategy for which we know there are numerous other proposals that look at how hydrogen can be developed in Australia and potentially exported from Australia. But each of them will have to pass a commercial reality test in terms of whether investors stump up the cash to invest, and that of course is what has driven and fueled all of our export industries in the energy and resources sector to date.

Question: Australians have got $100 million of taxpayers’ money here on the line. They could expect to know when this type of technology’s going to approved, particularly the carbon capture technology. When is this going to happen?

Senator Birmingham: I’ll add one point and then Matt- and that is Australia invests billions of dollars, around 9 billion of federal dollars each and every year in research and development. We don't know from research and development what innovations will fly and which one’s wont. But we invest in research and development because that's what keeps us as a modern economy at the cutting edge of the future. If we didn't invest in research and development, if we didn't invest in potential new technologies, well then we wouldn't be a part of new industry in the future. So this is a prudent investment about ensuring that Australia, who relies so heavily as a nation on our energy and resources exports, and still be a world leader in energy resources exports in the future. And it may take years in terms of the commercial realities of all of these projects coming to fruition, but we ought to make sure we invest in the real life potential. And this is a real life potential, because you don't just have Government putting their dollars on the line. You have many millions of private sector dollars going into this project and being put on the line as well.

Question: That's all very well but I just- I’ll point on this particular bit of technology – you've got inside information – when is it going to- when are [indistinct] that it might be ready – is it 10 years away, is it three years away?

Minister Canavan: Well look, I want to repeat the point and echo, what Simon just said: the Commonwealth and State Government investments is also unlocking hundreds of billions of dollars of private investment in Australia. So Kawasaki Heavy Industries are partners on this project; they're putting up almost $400 million of their own capital, to supplement the hundred million dollars is being jointly funded by the State and Federal Governments. We can't provide definitive timelines on exactly when a commercial scale project might be able to start, because of course we're doing a pilot because of the uncertainty about how this will work.

It is a world first so we have to wait for those results. We're hoping though, the expectation is, that this project will deliver those results by around 2022-23 and a decision leading up to that would be made on whether a commercial investment would be possible. So about five years from when we made the investment last year. There is a lot of moving parts here with a project of this size and uniqueness as you'd expect. It's not just the research we're doing here in liquefication - the conversion, sorry, the liquefication and transport of hydrogen to Japan. As has been remarked, we were also looking to find a long term solution for carbon capture and storage in any commercial scale project.

So my department, along with state government, is investing in what’s called a Carbon Net Project which is searching for a suitable site in the Bass Strait not far from here. It is an unrelated project but we'll have to have both of those sort of combined, if you like, over that five-year period to unlock that further investment.

Question: Just to be clear, you said a $50 million contribution from the Feds so that’s a matching what the Victorians are contributing?

Minister Canavan: That’s right, 50/50.

Question: 50/50 and 400 from the consortium?

Matt Canavan: I think the total project we can get to is about 496 or so in total. So it's 50/50 to 100, and the rest of the balance is divided by Kawasaki and their partners.

Question: Minister, on the commercial viability. I spoke to Yara International who are working on their own pilot program in the Pilbara on a hydrogen program and they say that they think that hydrogen is unlikely to be viable in Australia without a carbon price and without international carbon pricing. Do you think that on the evidence before you that we can have an industry in Australia without a carbon price?

Minister Canavan: Look, I think we can lower emissions through a range of ways which don’t require a specific and explicit carbon price. We have successfully reduced our emissions here in Australia using the direct involvement of the Government through the Emissions Reduction Fund. We have at the election promised to establish a new Climate Solutions Fund on a similar basis. And since the election I see the Labor Party also saying that they think that carbon pricing type solutions might not be the best strategy. It’s taken only four elections for the Labor Party to get that through their head, but hopefully we can move forward now in a bipartisan way which supports efforts to lower emissions without slugging Australian taxpayers with carbon tax.

Question: The locals here, their argument is that Japan gets all the clean energy and the hydrogen, the liquefied hydrogen, and they get all the pollution. Is that accurate, what they’re saying? They’re saying that that’s what they’re going to be living among while Japan gets what’s clean.

Minister Canavan:Yeah look, look I don’t accept that given our strong record of exporting resources and energy to Japan in a way that clearly has significant mutual benefits to both countries. That has been a long term relationship over 50, nearly 60 years now with Japan and this just builds on that same experience.

This project itself will provide hundreds of jobs albeit short term ones in construction of the pilot project, and then long term there are potentially thousands of jobs in the hydrogen industry in Australia for Australians – just as we have thousands of jobs in our own oil industry, thousands of jobs in our natural gas industry, thousands of jobs in our coal industry.

It’ll then provide benefits to Japan but also benefits here. We can’t trade with another country without providing benefits to the other country. Of course they wouldn’t buy our resources if there weren’t benefits to them too. But by definition trade provides mutual benefits and that’s what we’re supporting here today.

Question: I think [indistinct] promised hundreds of jobs in Latrobe Valley, how many actual jobs are there now? How many jobs is this providing Latrobe Valley right now?

Minister Canavan: Well my understanding is the work in the Latrobe Valley hasn’t quite kicked off yet, that’s what I was informed this morning, but we’re expecting that sometime this year. So I don’t have a specific job number but my understanding is over the life of this project there’s around 400 jobs. But, as I said, we’re not there. This project is not primarily providing those long terms job, it’s a pilot program so we’re not seeking to over exaggerate that. But obviously you need to make investments like this to prove up and de-risk, long term, large investments which could provide thousands of jobs.

Question: On the issue of trade, Australian coal exports are still getting held up in China – that’s what the industry’s saying. Have you made any direct representations to your counterparts in China? And what are you hearing out of China in terms of what’s going on there and how long it’s likely to continue?

Senator Birmingham: Well I have had conversations with Chinese officials, as indeed has our Ambassador in China. We continue to monitor this situation very closely, we continue to note the assurances of the Chinese Government that the delays that are being experienced are as a result of new environmental testing and standards that China has been applying and that those standards are being applied uniformly in relation to particularly thermal coal imports into China.

Australia wants to make sure that our producers can export with confidence and certainty around the standards that have to be met. Australian coal is amongst the most efficient and effective in the world and we back our industry, we note and we continue to see and have seen record levels in  terms of Australian coal exports to China and we want to continue to make sure that we work cooperatively with those Chinese authorities and to give, not only our industry the certainty to export, but those Chinese industries who rely upon Australian coal, the certainty that they’re going to get it in the type of timely matter they expect to receive it.