Speech to the APPEA 2023 Conference, Adelaide
Hello everyone. It’s great to be back in South Australia.
As we know Perth and Adelaide are pretty similar. We share a border and a love of good wine. We both have great climates and beaches. You build submarines that end up being based in WA. And both States are split firmly between two AFL teams and two port based teams.
I would like to begin by acknowledging that we are meeting on the traditional country of the Kaurna people of the Adelaide Plains and I pay my respect to Elders past and present.
I also extend that respect to other First Nations people here.
The Government has pledged to work in genuine partnership with our First Nations peoples and is committed to implementing the Uluru Statement from the Heart in full.
As you know we will hold a referendum later this year to recognise Aboriginal and Torres Strait Islander peoples through the establishment of a Voice in the Constitution.
I note many companies here have long been strong supporters of this constitutional change and I thank you for that.
Woodside CEO Meg O’Neill put it well when she told the National Press Club last month this will be an opportunity to bring Australians together.
I encourage everyone here to consider where they will stand at this moment in history and to show your support for both the historic vote, and its implementation.
Thanks to APPEA’s Chief Executive Samantha McCulloch for that opening address and can I acknowledge my friend, South Australian Minister for Energy and Mining, The Hon Tom Koutsantonis and Glenn R Stevens, former governor of the Reserve Bank of Australia, both of whom will be speaking shortly.
It is an honour to be back at the APPEA conference to deliver this year’s keynote address, my first as the Federal Minister for Resources.
Some of you will remember the video message I provided as Shadow Minister to the 2022 APPEA conference, which was held during the election campaign.
In that video, as the Karratha LNG plant flared noisily behind me, I said that:
“Australia is facing a choice: shape the future or be shaped by it.
“The new global economy that is emerging is principally one focused on energy: energy sources; energy transport; energy storage; energy usage.
“It's an extraordinary time to be in the energy game.”
Certainly, this past year has demonstrated the deep and complex truth of that assessment.
Lead, Shape, Innovate – Accelerating to Net Zero
The conference theme is Lead, Shape, Innovate – Accelerating to Net Zero.
The Australian Government is strongly committed to reaching our net zero emissions target by 2050.
And as I have said many times before – the pathway to net zero runs through the Australian resources sector. This is a point that is sometimes not as well understood as it should be.
Traditional commodities, including our energy resources, will play an essential role in supporting Australia’s economy transition to net zero, while also continuing to underwrite energy security for our key trading partners.
Whether it is the minerals that go into solar panels and batteries, or the gas required to process many of those minerals today, the net zero transition is enabled and underpinned by the Australian resources sector.
And we want to work collaboratively with the resources sector to reach our net zero goal in a practical and pragmatic way.
Australia is and will remain a stable and reliable energy supplier to domestic industries, households and our partners in the Asia Pacific region.
Our transformation to net zero does not necessitate high prices for traditional energy sources. Australians will quite rightly not accept these things.
While the net zero transformation creates opportunities for the resources sector, it equally presents challenges.
The Government has taken decisions in recent months to implement our agenda, including legislating landmark climate reforms that enable Australia to reach our net zero commitments.
The Budget has also introduced reforms to the Petroleum Resources Rent Tax that will build confidence that the Australian people are getting a fair share of the return from the resources they own.
Changes detailed at last week’s Budget to the Petroleum Resource Rent Tax bring to a close a review of PRRT initiated under Scott Morrison when he was Treasurer.
The Government is committed to pursuing an economic reform agenda that delivers for the Australian people, and I understand this has not been easy for the sector.
I thank you for working constructively with the Government on the suite of reforms we have implemented. And I look forward to partnering with you in the months and years ahead as Australia begins to dramatically scale up our net zero ambitions.
Reaching net zero will require smarter use of our resources to provide the building blocks needed for renewable technologies.
It means ensuring we have an adequate and affordable supply of energy to meet our domestic, industry and export needs.
And gas will play an important role. As the Prime Minister has said, ‘gas is, and will, continue to be an essential part of our energy mix and is essential for the energy transition’.
Australia’s manufacturers currently rely on gas for 42% of their final energy use and they accounted for 26% of Australia’s total domestic gas consumption in 2020–21.
Gas is a feedstock for chemicals, including fertiliser produced for the agricultural sector and explosives for the mining sector.
Australia is one of the world’s largest LNG exporters, accounting for about 21% of global LNG exports.
Australia’s LNG export revenues are forecast to reach $91 billion in 2022–23.
Nations across the Indo-Pacific still rely on Australian gas to ensure their own energy security today and support their clean energy transformations, with higher penetration of renewables.
Japan, South Korea, Singapore and China have been our most important LNG trading partners for years.
Australia is by far the largest LNG supplier to Japan, providing nearly half of its LNG imports in 2022, worth an estimated $34 billion.
Australia’s gas supplies to South Korea and China in 2022 were worth an estimated $18 billion and $19 billion, respectively.
Japanese and South Korean demand, and their significant capital investment, has underpinned the development of Australia’s LNG industry, on both our east and west coasts.
Our nation is a reliable energy trade and investment partner, and a positive contributor to decarbonisation.
But the recent energy crisis has demonstrated that Australia’s east coast gas market is vulnerable to shocks, notably due to Russia’s illegal invasion of Ukraine.
Both the Australian Energy Market Operator and ACCC have also said Australia’s future domestic gas needs will not be met through existing sources of supply.
Additionally, the IEA has recently acknowledged that even in its most ambitious transition scenarios, more new investment in gas resources will be needed.
But with the passage of our Safeguard reforms we are ensuring that that development occurs in line with, not contrary to, the trajectory to net zero.
We need to, and can, get the policy settings right to achieve affordability, security and sustainability through all stages of the transition to net zero.
This is why at last week’s Federal Budget the Australian Government announced it would develop the Future Gas Strategy.
The Strategy will support Australia’s energy system to become cleaner, cheaper and more reliable while maintaining our international reputation as a trusted energy supplier to the region.
I invite members of the industry to contribute to the Future Gas Strategy, and to help us shape the future of our gas sector.
Through the Future Gas Strategy, we will create a framework that balances energy security with affordability and investment certainty.
Part of our contribution to global decarbonisation involves driving emission reduction outcomes across all sectors of the Australian economy.
Accelerating to net zero will require a step-change in how the Australian oil and gas sector operates.
Gas is a highly flexible fuel, it can be quickly ramped up and down, and is needed in power generation to support peaking and firming and greater reliability in the grid as renewables increase.
But at the same time, the gas industry is a major contributor to Australia’s emissions profile.
In 2020/21, 8.4 % of all Australia’s emissions came from the extraction and processing of natural gas and oil.
If Australia is to meet its emissions reduction targets for 2030 and net zero for 2050, the industry’s emissions must come down.
Our reforms to the Safeguard Mechanism will drive down emissions from Australia’s largest emitters while maintaining the international competitiveness of our most important export industries.
I acknowledge many resources companies adopted ambitious emissions targets well before the Commonwealth that will put them on a trajectory to net zero, including corporate commitments equal to or even more ambitious than net zero by 2050.
The Safeguard Mechanism provides companies with a stable policy framework over the long term that will allow them to achieve these commitments.
Carbon Capture and Storage
Perhaps the single biggest opportunity for emissions reduction in the energy resources sector is through Carbon Capture and Storage (CCS).
The International Energy Agency and Australia’s own Climate Change Authority make clear that CCS and wider CCUS applications are a necessary and vital part of any rapid decarbonisation effort.
CCS represent an opportunity for Australia if we get it right.
The will is there. The know-how is there.
Government has a role in supporting industry investment by reducing risk and creating certainty through clear legal and regulatory frameworks and robust policy guidance.
To this aim, the Government, through last week’s Budget, committed to examining opportunities to provide regulatory and administrative certainty for CCS projects in the resources industry, as well as broader industrial use cases.
We want a regulatory system for offshore CCS that is robust and responsive, and positions Australia’s resources sector to bring new CCS projects online.
The Safeguard Mechanism doesn’t just provide an incentive for new CCS projects to meet abatement goals, it opens the possibility for the earning of Safeguard Mechanism credits if CCS projects are successful in lowering emissions below baselines.
But of course, you and I both know, that emissions reduction, will rightly only be accounted for if they are verified and scientifically sound. We want to work with industry to progress new projects, whilst ensuring they are effectively regulated to meet community expectations.
Last year I announced the first two new offshore greenhouse gas storage permits in fourteen years*, but there is scope to dramatically scale up Australia’s offshore CCS capability.
To this end, and in recognition of the need to scale up CCS, the Government will shortly commence public consultation on a new round of greenhouse gas storage acreage.
The sector and Governments around the world, have invested heavily in CCS over previous decades and CCS technology currently has the capacity to sequester 44 million tonnes of carbon dioxide globally on an annual basis.
But there is potential for supporting decarbonisation efforts for the resources sector but more widely for important hard to abate industries.
Importance of decommissioning
Similarly, there is also great potential arising from decommissioning activities.
Decommissioning is an important part of all offshore petroleum projects.
In Australia, decommissioning is at a relatively early stage, but it will increase over the coming decades.
The Northern Endeavour brought a heightened focus on the need for companies to actively plan and provision for decommissioning throughout the life of their projects.
Planning for decommissioning should not only be about dismantling and deconstructing offshore equipment, but also consider ethical management, repurposing and recycling of infrastructure.
I want us to capture this investment opportunity to build a competitive, world-class decommissioning industry to service demand in Australia and the Asia-Pacific.
To do this, the Government announced last week it was developing a Roadmap for Establishing a Decommissioning Industry. This roadmap will explore pathways to establish a decommissioning industry in Australia.
It will also examine opportunities to grow a local skilled workforce, create supply chains, and pathways for the ethical and responsible management of decommissioning activities from the offshore gas industry.
For example, the steel from offshore infrastructure can be recycled and used for technologies that will be essential for the transition to net zero, such as wind turbines.
Essentially, it’s about putting us in a position to capture the opportunities from the estimated $60 billion of offshore petroleum decommissioning activities expected to occur in Australia over the next 30 to 50 years.
The resources sector employs more than a quarter of a million workers and is a leading employer of First Nations people.
But it needs more skilled workers to deliver on existing projects as well as to build the pipeline of planned projects.
Resources will be critical for the transition to net zero and we need to encourage our students of today to become part of our workforce for the future that will be part of the global drive to net zero emissions.
Inspiring students to consider studying for a career in resources should be part of your mission.
An obvious way companies could address skills shortages is also to attract more women to the sector.
Women currently make up only 26 per cent of the oil and gas sector’s workforce.
To increase this figure there needs to be changes in workplace culture to make the resources sector more welcoming to women.
Every worker has the right to be treated with respect in the workplace and the health and safety of workers is essential.
This industry is working to reform poor workplace cultures but more needs to be done. Sexual assault is a blight on the industry and must stop.
Directors need to lead and commit to ensuring that the mine site is as safe and inclusive as the Boardroom.
To reiterate - in order to decarbonise, the world needs our resources industry.
This includes Australian natural gas, which will be a critical partner in the decarbonisation of Australia’s economy, and for our neighbours’ net zero pathways as well.
But emissions in the oil and gas sector must be reduced significantly.
Bringing down emissions consistent with the Paris Agreement is an important part of earning and maintaining a social licence for operations.
That is why it’s so important the sector is developing new technology and adopting cleaner production processes.
There is some way to go, but by working together we will put our nation on a firm path to achieving net zero by 2050.
(* Correction - The sentence should say the first release since 2014.)