It’s great to be back for another South East Asia Australia Offshore and Onshore Conference. I thank Informa Australia and the Northern Territory Government for their continuing commitment to this long-running conference.
Author Tess Lea said in her biography of Darwin that: Darwin is a survivor, you have to give it that. Razed to the ground four times in its short history, it has picked itself up out of the debris to not only rebuild, but grow.
I think this statement is still true. Darwin is a survivor and it continues to grow. I know the city has been doing it tough the past few years but I am extremely confident of its future. Indeed, I am more confident about its future growth prospects than perhaps any other city. That is all because you have a world class oil and gas deposit south of here.
The Beetaloo basin contains an estimated 180,000 PJ of gas - enough to supply the east coast of Australia for almost 350 years. The Australian Government not only supports the development of the Beetaloo Basin, and we always have, we are also actively encouraging its development for the broader benefit of Darwin. We want to make sure that the development of the NT's gas resources is a pipeline to the creation of thousands of manufacturing jobs in Darwin. Darwin is already an energy hub for the nation. We should now aim to create a manufacturing hub here. That will not only deliver important benefits for Australia, it will create long term, stable jobs to help develop a resilient economy in the Northern Territory.
We are helping the Northern Territory achieve these goals through three main ways.
First, we are funding research to facilitate the development of the Beetaloo as soon as possible. At the election we committed $8.4 million to support the development of the Beetaloo Sub-basin. This funding will help conduct the baseline science to facilitate the speedy approval of projects and also help ensure that economic benefits are delivered for the Aboriginal people of the Barkly Region.
Second, we are considering the establishment of a National Gas Reservation Scheme that will guarantee gas for the NT from the development of the Beetaloo. We are determined not to repeat the mistakes that we made in Queensland in the NT. Almost a decade ago now when the Queensland coal seam gas fields were being developed, no one was in charge of looking at what their development would mean for the domestic gas market. The federal government gave environmental approvals, the state government gave local planning approvals but no one looked at the broader impact of the development. I don't say to this attribute blame. Governments of all political persuasions made the same errors and we all mistakes. We shouldn't make the same mistakes twice though. That is why the government has announced that we will consult on the design of a National Gas Reservation Scheme. Western Australia already has a scheme that works. They have attracted $100 billion of investment in gas over the last decade while also securing some of the lowest gas prices in the world. It is a system that works.
We should also not be shy in claiming our national interest in resource development. We are an open country that welcomes investment and exports our energy and resources proudly to the world. But we should ensure that some of the energy and resources developed in Australia stay in Australia to produce Australian jobs. I welcome the recent support for the industry for this broad position. For example, INPEX's board had their first meeting outside Japan here in Australia last month and they committed to ensure that future gas production including in the Beetaloo Basin contributes to Australia's domestic energy security. We will consult widely on the design on any scheme with state governments and the broader industry. We will ensure any such scheme maintains investment incentives and only applies to prospective investments. The Northern Territory and the Beetaloo basin are obvious candidates to benefit from such a scheme. Yesterday’s announcement by Coogee Chemicals shows the potential of Darwin to become a manufacturing hub. If we get on with the job of developing this gas, this could just be the start.
We have a very clear message to other states. You can't benefit from a reservation scheme if you don't develop your gas resources. We could have a 100 per cent reservation scheme but 100 per cent of zero equals zero. There are no more excuses for New South Wales and Victoria not to open up their gas resources. The federal government is happy to help and support them in doing that, just as we are doing here in the Territory, but we can't help them if they don't help themselves.
Third, with the Northern Territory Government we are already investigating the potential of manufacturing in Darwin and will use this information to market Darwin to the world. We’ve signed an MoU with the Northern Territory Government to support the development of the Territory’s gas industry. Under this agreement the Australian and NT governments are funding a scoping study that will determine the requirements necessary to develop a world class oil and gas industry, and related manufacturing opportunities. The study has recently provided us with a draft report of its earlier findings. The key issue is scale. The report unsurprisingly finds that to get gas costs of production low enough to support manufacturing opportunities we need production levels to be relatively high, somewhere in the order of 500 PJ a year. That is achievable given it is about a third of the production in Queensland's coal seam gas fields. At this level of production, the costs of production could be around the $4 to $5 per gigajoule mark which would probably make it the cheapest gas in Australia. That is a competitive advantage the Northern Territory should strive for!
These figures are also based on just dry gas production. If liquids are found that will of course help to bring the breakeven costs of production for gas down further. To get that scale we need to make sure the regulatory settings are right so that production opportunities are not hindered. I welcome how far the NT government has come since I first spoke at SEAAOC three years ago but it is not time to pat ourselves on the back yet. We can’t afford timelines to slip any further. There is still a lot of implementation of the Pepper inquiry's recommendations to go, and the detail of that regulation will be key to the success or otherwise of the Beetaloo.
All together, it is the most exciting oil and gas province in Australia and the Northern Territory is at the centre of it. One of the reasons it is so exciting is because it is the first major shale gas play in Australia. It has been shale oil and gas that has revolutionised global energy markets in the past decade. The developments in the United States have helped their prices fall by more than two-thirds. In Texas, manufacturing output has increased by 50 per cent as a result and the costs of US chemical companies are down 8 per cent. For the first time in more than 50 years the US has become an energy exporter.
Now that has happened, gas prices around the world are starting to fall at a dramatic rate. A few months ago at the APPEA conference I mentioned these developments and expressed the view that we should anticipate these lower global prices having an impact on our markets. We of course cannot import gas from the US as we have no facilities to do that, but at the margin lower gas prices in this region should encourage gas exporters to put more gas on the domestic market and help to lower prices. We have started to see that happen. Since the beginning of the year spot gas prices in Brisbane and at the Queensland Wallumbilla hub are down more than 20 per cent. Prices have fallen between 10 and 15 per cent in Sydney, Victoria and Adelaide. Prices in Brisbane averaged less than $7 per gigajoule in August.
These are all positive developments for east coast gas markets. They also confirm the wisdom of the Australian Government’s actions two years ago to introduce the Australian Domestic Gas Security Mechanism. That scheme ultimately led to an agreement with Gladstone LNG gas exporters to offer uncontracted gas to the domestic market first. These arrangements have clearly helped lower gas prices. Spot gas prices are down by over a quarter since. Further falls in gas prices are dependent on state governments opening up their resources for development.
There are many red tape issues in the resources sector - which I will say more about soon. But in many states in regards to gas there is not just red tape - there is a big red brick wall stopping all development. We must tear down this wall. Thousands of manufacturing jobs in eastern Australia depend on it. There remain extremely prospective gas developments all around Australia. Notwithstanding the huge investments and developments of the past decade, there remains much more to develop in Australia.
For example the Barossa Project is likely to be the first major backfilling project in Australia. The project is expected to extend the life of Darwin LNG for about 16 years after 2022. It will add 1.5 million barrels of condensate per year to our production and create further income and employment opportunities for the Northern Territory and Australia.
The offshore Browse Basin continues to demonstrate its potential as a major gas basin, with huge prospects for future development. I remain in constant contact with members of the Browse Basin Joint Venture and again express the Australian Government's expectation that this project is brought to production sooner rather than later.
The Pluto expansion is important. It will help Australia further increase its 88 mtpa name plate capacity, and the Scarborough development may create future opportunities for third parties to tie in discoveries that would be too small to warrant stand-alone development. Similarly, recently made oil and gas discoveries in the Roebuck Basin confirm the vast potential of Australia's underexplored offshore basins. A prime example is the Dorado project, the third largest oil discovery on the North West Shelf. That project alone has the capacity to boost Australia’s oil output by 50 per cent.
The Great Australian Bight also remains an exciting frontier opportunity for oil and gas development. We have asked the Chief Scientist Dr Alan Finkel to report on the approvals and assessment process for this project in response to community concerns. We have received that report and I and the Minister for the Environment Sussan Ley will release it soon.
Broader red tape in the resources sector remains an issue. Earlier this year the Australian Government released the first National Resources Statement for 20 years. The objective of that statement was to make Australia the best resources country in the world. We identified that perhaps the best thing we could do to meet that objective was to reduce the red tape that afflicts approvals in Australia.
We are working with the States and Territories to improve matters. With the agreement of the states, I have announced a Productivity Commission inquiry into reducing red tape in the resources sector. That report will look at best practices both here and overseas and report back to COAG in 12 months. Later this year the Government will also begin a review of the EPBC Act and encourage the broader resources sector to fully involve themselves in all of these reviews.
Removing red tape on approvals is so important to continued investment in the resources sector. Australia's resources have never been more important to our nation's wealth than they are today. Data released this week has underlined that. Yesterday’s National Accounts showed continuing, albeit reduced, economic growth in the Australian economy, and the mining sector contributed 0.3 per cent of the 0.5 per cent growth in the economy. Mining growth over the year, from June 2018 to June 2019, was a healthy 6.2 per cent (seasonally adjusted), the highest rate of growth of all market sectors and second overall behind health care and social assistance, which grew by 7.9 per cent. Exports of resources and energy were $76 billion in the June quarter 2019, up an impressive 46 per cent from just two years ago, when they were $52 billion in the June quarter 2017. Over the last year the value of our top three exports of iron ore, coal and gas were greater in value than all other goods exports combined.
These results highlight how important the export of resources and energy is to the Australian economy, supporting jobs, investment and incomes throughout the nation. The strong performance of our resources and energy exports is expected to continue, with the Office of the Chief Economist projecting in June that resource and energy export earnings are forecast to hit a record $285 billion in 2019–20. It is those strong exports that delivered Australia's first current account surplus for 44 years. A current account surplus delivers more economic wealth for all Australians on the back of record exports. We don't make cars or clothes anymore so we have to have something to fill the boats up with to send in the other direction. To keep producing this wealth we must keep attracting investment to the industry. That is what I am focused on doing and it is that investment that will ensure that Darwin continues to grow.