Australian Domestic Gas Outlook Conference
Industry leaders, distinguished guests, ladies and gentlemen, thank you for the opportunity to speak to you via video message.
This conference, coming in the wake of a difficult period for our nation, affords the chance to explore how we can look to the future in an industry so vital to Australia.
For the oil and gas industry worldwide, the past year has been a volatile one.
COVID-19 led to market and price fluctuations and impacted almost every activity: investment, exploration, extraction, distribution and consumption.
Australia’s gas industry has done well and done well against the odds.
Some of you played a part in the response to the personnel and operational challenges, keeping supply lines running and ensuring Australians have access to secure gas supplies at affordable prices.
I thank you for your leadership and more importantly I want to thank the workers in the industry who have shown real determination to work through the restrictions to keep Australia and our trading partners supplied with gas.
By all indications, the challenging conditions brought on by COVID-19 are improving. The latest National Accounts shows a phenomenal 3.1 per cent economic growth in the December quarter.
And the recovery in economic activity is ramping up.
Capital expenditure is up. Employment is up. Unemployment is trending down. Business and consumer confidence has also bounced back.
Activity in Australian manufacturing, a key gas consumer, is expanding.
Australia's GDP growth forecast for 2021 and 2022 has been upgraded, along with forecasts of higher-than-expected global economic growth.
An improved macroeconomic environment bodes well for the gas industry. In post-COVID Australia, gas will be critical for economic recovery and growth.
The government remains committed to a gas-led recovery and the sector has shown it can continue to deliver for Australia when we need it most.
Today, I’d like to reaffirm the importance of the domestic gas sector in Australia, focusing on the lead role gas will play in driving economic recovery and helping spur growth and jobs in industries like manufacturing.
I will also look at our work with the states, the Northern Territory and the gas industry to open up new gas supplies and deliver more and affordable gas.
The importance of domestic gas supply
Gas is vital to Australia’s energy security and plays a key role in the economy.
As Australia’s third largest energy resource, gas will remain a crucial part of our energy mix well into the future.
However we need to open up new gas resources to power up our gas-fired recovery. More gas closer to markets is the best recipe for competition and lower gas prices over the long term.
Opening up new gas supplies
The government is also pressing ahead with its commitment to unlock new gas supplies in five key basins through the $28.3 million Strategic Basin Plans.
We’ve finalised the plan for the Northern Territory’s Beetaloo Sub-Basin and work on the North Bowen and Galilee Basins in central Queensland is progressing.
With the Beetaloo Strategic Basin Plan, we’re seeking to achieve four key outcomes, backed by $224 million in new funding.
First, the appraisal of gas resources will be accelerated through a new $50 million Beetaloo Cooperative Drilling Program.
The program will support gas operators to speed up exploration activity worth at least $200 million before 30 June 2022.
Second, the Australian Government will work closely with the Northern Territory Government and local industry to build the necessary infrastructure to support the sub-basin’s development.
To this end, we’re committing over $173 million to the Northern Territory Gas Industry Roads Upgrades program under the Roads of Strategic Importance initiative. The program is expected to support over 400 jobs.
Third, more efficient and effective regulatory processes will be delivered, including cutting red tape.
Last but not least, we will be working with local communities to ensure they realise the benefits from the sub-basin’s development.
The Beetaloo has great potential to be a world-class gas province and I can’t wait to see it bring investment and jobs to the north, while delivering secure and affordable gas to industry, including manufacturing.
It is estimated that by 2040, the Beetaloo could generate 6,000 jobs and boost economic activity worth up to $36.8 billion.
Finally as part of the Gas Fired Recovery Plan we are looking at how the various reservation policies in place around Australia work and how best to ensure that gas is available to the domestic market along with supplying our trading partners.
Supporting a revitalised manufacturing industry
A major focus of the government’s economic recovery plan is manufacturing, an industry that employs more than 850,000 Australians.
Australia’s manufacturing industry relies heavily on gas to operate. Gas provides about 41 per cent of the energy used in manufacturing.
As an example late last month, the Australian Government backed the expansion of Agripower Australia, a fertiliser company in north Queensland, with a $71 million loan through the Northern Australia Infrastructure Facility.
As you know, fertiliser manufacturers are among Australia’s largest gas users.
The expansion of Agripower and the jobs it will bring is one more reminder of the conducive energy environment and the important role the domestic gas industry plays in supporting the growth of industry and economic development.
The relationship between these two industries is likely to grow as the government rolls out a plan to revitalise manufacturing in Australia.
What experience has taught us is the need to tackle vulnerabilities in our supply chains and build resilience and security, and we have the domestic capacity and ingenuity to meet this need.
The government is turbocharging Australian manufacturing with a $1.5 billion Modern Manufacturing Strategy, to help us achieve this.
The resources sector is well positioned to provide the energy and raw materials a revitalised Australian manufacturing sector will need.
The strategy is part of the government’s JobMaker plan. It will enable Australian manufacturers to scale up, become competitive, more resilient, and create jobs.
We have identified six National Manufacturing Priorities for support, including resources technology and critical minerals processing, and clean energy.
Stable and secure sources of energy and raw materials are essential for manufacturers to make long-term investment decisions in Australia.
In other words, a turbocharged manufacturing sector in Australia is directly linked to a strong supply of domestic raw materials and energy such as gas.
Gas represents a significant input cost for many manufacturing businesses. It has to be affordable and reliable if Australian manufacturing is to be competitive and keep thousands of Australians employed.
That's why tackling gas market pressures, bringing on new gas supplies, and keeping downward pressure on prices are high priorities for the government.
New Heads of Agreement
In January, the Prime Minister announced a new Heads of Agreement with the east coast LNG exporters.
This ensures more gas is offered to the east coast market, more often, at internationally competitive prices until 2023.
The new agreement requires east coast LNG exporters to offer uncontracted gas to the domestic market before exporting spot cargoes.
Exporters are also required to give domestic customers sufficient notice when making an offer.
And they will have to offer the gas on competitive market terms with reference to the ACCC LNG Netback price.
Recently we have seen contract gas prices fall to around the $6-$8 a gigajoule mark. The recent recovery in oil prices to around US$70 barrel means that oil-linked contract LNG supplied into our markets in Asia will be recovering from the low levels of the second half of 2020.
I know that there has been criticism of the Heads of Agreement from some sectors – however our goal is to get the right balance between affordable gas for manufacturers and a price that encourages new gas resource development.
I am firm in the belief that we have got this right.
But it’s also absolutely important the states work to bring more gas online.
The imposition of unscientific bans and moratoria, rolling over to green activists and pandering to self-interest could effectively end the gas exploration and production industry.
Boosting the transport network
Bringing on new gas supplies goes hand in hand with adequate transport infrastructure.
We need to get the gas from the producing regions to where it is needed most and the government is working to boost the gas transport network.
Priority pipelines and critical infrastructure will be identified as part of an inaugural National Gas Infrastructure Plan.
The plan will highlight areas where the government could assist in the private sector in addressing transport requirements.
Reforming the regulations on pipeline infrastructure and improving pipeline access and competition is an ongoing piece of work.
Gas is vital for Australia’s economy and Australia has enough gas to meet our domestic needs and the needs of our export markets for decades to come.
The domestic environment is brimming with opportunity to develop more of our gas resources and realise further benefits from gas.
We have an economy recovering from COVID-19’s impacts and in need of gas to support industry and jobs. And a government committed to a gas-led recovery.
We have a manufacturing industry being turbocharged in a way that will require a strong domestic supply of gas to fuel increased operations.
We have a gas industry that has demonstrated a capacity to deliver gas to our homes and businesses, in good times and tough times, without skipping a beat.
And as a nation, we’ve shown we can work together—government, industry and the community—to open up new supplies, tackle market pressures, and ensure affordable and reliable supply to homes and industry.
The outlook for Australia’s domestic gas industry is bright.