2018 APPEA Conference

It is great to be back at another APPEA conference. I get to a few conferences both here and overseas. Can I say that yours is one of the best in the country. It truly is a world class conference. It is great to see another successful turnout.

Australia should be able to put on a world class conference because we are about to be the world's largest exporter of gas. That is something to be proud of but I think we have all learnt over the past year that the contribution of this industry to Australia must extend beyond just exports.

The Australian oil and gas industry is a great industry that is a world beater. Over the past year you have also become a great Australian industry by helping to alleviate what was a gas crisis.

Last year, when I spoke at APPEA, the gas price at Wallumbilla had been $10.66/GJ over the first three months of the year. Over the first three months of this year, the price has averaged $8.07/GJ, a 24 per cent reduction.

The action that Australian gas producers took to bring back gas to the domestic market, in an agreement with the Australian Government, played a key role in helping deliver that outcome.

I will say more about the domestic gas market later, and I will also discuss the PRRT and the acreage release program, including some reforms to how we conduct acreage release.

Selling the industry

But first I want to hark back again to last year's conference. I recall that the topic of last year's conference was "You're the Voice", or at least I can remember a passionate rendition of John Farnham's classic. In my memory I think it was belted out by Malcolm Roberts reclining on a Grand Piano?

The reason I raise “You're the Voice” is because while that is true, sometimes we have too much of a tendency at conferences like these to talk only to each other and say "you're the audience" as well.

When we also need to think about the audience out there. The real audience for many of our messages needs to be the Australian people. How can we ensure that they hear and understand the importance of this industry?

Well that must start by selling to the Australian people the benefits of an oil and gas industry, and we need to think beyond just the benefits of exports, wealth or even jobs.

Recently, there has been controversy about the low level of Australian oil reserves relative to International Energy Agency requirements of holding 90 days of the previous year’s average daily net imports.

Senator Jim Molan, a former major general in the Australian Army, has said that Australia is in "real trouble" with this level of reserves.

Liquid fuels account for 37 per cent of our energy use and 98 per cent of our transport needs. The Government is undertaking a Liquid Fuel Security Assessment. This will look at how fuel is supplied and used in Australia, including our resilience to withstand disruptions both overseas and in Australia.

The current level of just under 50 days of net imports has been driven by falling domestic oil production which means even though physical stock levels have remained stable we have higher net imports. The tendency to focus on importing more oil to solve the perceived problem will not on its own address energy security issues.

There is not enough focus on the potential to increase Australia's own domestic production of oil. This would have the dual impact of more readily increasing our domestic stocks and reducing the amount needed to meet IEA obligations, because these obligations are based on net imports.

To the naysayers who argue we will remain a net oil importing country, just look at the United States. In a famous Foreign Affairs article in 2003, Daniel Yergin and Michael Stoppard correctly predicted the rise of a global LNG trade. However, they incorrectly forecast that within 10 years the United States would be the largest importer of natural gas in the world.

Instead the direct opposite has happened, and some now predict that the United States will be the largest gas exporter of natural gas by early next decade. Things can change fast.

It has also happened in Australia too. In the 1950s the Australian Government decided to support the exploration of oil through the Petroleum Search Subsidy Act 1957. Ultimately this led to Esso and BHP finding oil in the Kingfish field in the Bass Strait. Within a decade, Australia went from full dependence on imported oil to 70 per cent self-sufficiency.

This is why I am so excited about developing resources like the Beetaloo Basin. It is exciting that we could expand resource exports through the development of these fields. It is exciting that they could provide much needed jobs in the Northern Territory. But it is even more exciting about what the impact could be for Australia's energy security.

There is a lot of interest in the Beetaloo Basin. Some of my geologists think that it could be as prospective as some of the shale fields in the United States. That of course means there could be a lot of gas, but there also could be significant discoveries of oil too. The latest estimates reckon that 1 billion barrels of oil could be discovered but more could be found once exploration starts.

I think we should be more strident in selling the Australian gas industry as not just a great producer of prosperity but also an industry that is critical to our national security too.

Domestic gas outlook

Of course more discoveries of hydrocarbons could also alleviate the gas supply issues on our East Coast. As I mentioned earlier the return of gas to the domestic market has helped alleviate the pressure on domestic gas markets.

The ACCC reported in April that price offers have halved from their peaks early last year. Offers peaked at just over $20/GJ last year and are now down in the $8-10/GJ range.

The East Coast domestic outlook for this year has gone from one in which there was a projected deficit of 54 to 107 PJ to a slight surplus of 20 PJ. The market remains tight, however.

Last year the government acted at the time to ensure supply to the domestic market.

We introduced the Australian Domestic Gas Security Mechanism to allow us to impose export controls on LNG projects if domestic gas supply was forecast to be inadequate.

We remain just as committed to ensuring that domestic gas supplies are adequate. Later this year the government will again review whether there is a domestic gas shortfall for 2019. Once again we are prepared to take action if supply is not sufficient.

While the ACCC has forecast a small surplus of 20 petajoules for 2018, its Chairman Rod Sims emphasised earlier this month that:

... there is the very real prospect of more industrial closures, and associated job losses, with the very high prices being faced by industrial users…

The response to this problem must carefully consider two facts though.

The first fact is that the Queensland coal seam gas industry is a net contributor to the gas market and we would be in a much worse position without it. Oil and gas production in the Bass Strait is declining. Fortunately, the ACCC estimates that, in 2018, Queensland LNG projects are contracted to supply domestic consumers with net 85 PJ of gas. That is slightly more than 13 per cent of East Coast demand.

The second fact is that the costs of production of coal seam gas is higher than the costs of production of traditional oil and gas fields like the Bass Strait.

The ACCC estimates that the cost of production in Queensland’s coal seam gas fields is $5-6/GJ – much higher than the traditional costs of gas production in the Bass Strait. And to get that gas to southern markets it costs another $2/GJ or so. There is no government policy that can change these costs, and we can’t supply gas to consumers at below the costs of production.

Increasing supply remains the best long-term way to prevent shortages and boost competition. New sources of supply need not have higher costs of production but we won't know if we don't look.

All states and territories should be guided by the science not emotion. The emotion of issues around fracking are real and understandable but they will pale into comparison against the emotions of job losses if we can't secure affordable energy supplies in southern Australia.

Resources 2030 taskforce

We must admit that one of the reasons Australia has struggled to develop gas resources is because the industry has struggled to maintain widespread support. There have been a variety of reasons for this. Controversies over individual projects, the mining downturn, etc.

There is no easy solution to this problem but one thing that I think would be useful is for the industry to have a plan, a long-term vision.

With this in mind, in March I announced the establishment of the Resources 2030 Taskforce.

This is an opportunity to review carefully and calmly the settings we need to keep the resources sector strong, and to bring forward bold but attainable reforms to secure its future.

I have asked the taskforce to focus on policy areas that can: attract investment; contribute to regional economic progress; build community support; simplify business; find new oil, gas and mineral deposits; and ensure Australia gets best use of its resources before they are exported.

The issues facing the Australian oil and gas sector are instructive as to why this inquiry is needed. We must work hard to maintain a competitive resource sector. We can already see that the United States is exporting significant amounts of gas to North Asia. For 50 years Australia has been almost the only developed country exporter of energy resources to Asia. That is changing and it is changing fast.

I am confident that we can respond to this challenge. But that might mean more collaboration among industry to bring costs down. It also puts pressure on governments to get rid of unnecessary red tape.

The Taskforce is chaired by Mr Andrew Cripps, a former Queensland Minister for Natural Resources and Mines, who brings a practical understanding of this sector from a state perspective.

Andrew is joined by eight other members with expertise from across the resources sector.

The Taskforce held its first meeting last month and is on track to report to me by 31 August. I will attend a roundtable to discuss the taskforce on the sidelines of the conference today.

The Government will use its report to develop a Resources Statement by the end of this year.

This will be the first time in two decades that the Australian Government has mapped out a policy statement for the sector.

I envisage that it will chart a course for the sector to 2030 and beyond.

Other resource-rich nations and competitors, like Canada, are developing similar plans, and I expect ours will provide investment certainty and help us to remain a leading resources nation.

Acreage release and reforms

We are a lead resources nation because we attract investment to a stable climate. We have a well developed method of allocating acreage.

The Australian Government is committed to the safe and responsible development of these resources in Commonwealth waters.

The annual Offshore Petroleum Exploration Acreage Release is a key part of our strategy to promote offshore exploration opportunities and I’m pleased to announce the 2018 release here today.

The 2018 release comprises 21 areas located across six sedimentary basins offshore of Western Australia, South Australia, Victoria, and the Ashmore and Cartier Islands.

The six sedimentary basins are the Bonaparte, Browse, Northern Carnarvon, Bight, Otway and Gippsland basins.

They provide a wide range of options for industry—from well-known, petroleum producing basins to frontier basins that are among the most prospective globally.

This year’s offering includes an area in the Great Australian Bight offshore of South Australia.

This area is seen as one of the most prospective frontier basins in Australia—if not the world—and offshore petroleum exploration activities have occurred safely there since the late 1960s.

I know there is growing community interest in, and some opposition to, exploration in the Bight.

I want companies to continue to rise to the challenge of safely and effectively exploring this area, while taking into account the views of coastal communities and other offshore industries.

I am pleased that the 2018 acreage release also includes seven areas offshore of Victoria.

These release areas are located close to existing infrastructure and I hope will be carefully considered to support Australia’s East Coast gas market.

The world is not standing still, and my department has been considering options to ensure our system of acreage release meets the needs of business, community and government alike.

I want to maximise investment and reduce unnecessary barriers to exploration.

Last October, we released a discussion paper seeking views on potential policy reforms and we are responding to the views of industry.

I want an efficient acreage release process which is responsive to industry needs while also recognising that it takes time to prepare strong bids, and that the public increasingly expects to be consulted.

With this in mind, I am proposing to put in place an updated model that delivers on these aims and ensures the acreage release system remains fit for purpose in the years ahead.

The proposed improvements will include increasing the range of acreage available, ensuring it is released in a timely manner, and making sure the role of consultation activities in the acreage release process is clear.

There will also be better nomination and area selection processes, a simpler bidding structure with a single date for bid submissions each year, and a return to work program bidding only.

We have just begun consultations on this updated model, and you may like to discuss it with the staff from my department at the Australian Government booth in the Exhibition Hall.

I am reliably informed they are at booth number 216 at the far end of APPEA Boulevard.

With increasing community interest in the offshore petroleum sector, it is vital to the industry’s future that the public has confidence in the regulatory process and that assessments are conducted transparently.

Australia has a comprehensive regulatory regime for the oil and gas sector and I think it is important that the community knows this.

We must make it easier for Australians to understand the regulatory process used to decide where, when and how offshore activities take place and to have their say during the approvals process.

Last November I announced a number of changes to the consultation and transparency requirements for Australia’s offshore oil and gas activities.

We are increasing the transparency of environmental approval processes, including publication of environment plans submitted by petroleum companies and a public consideration period before exploration activities are undertaken.


Notwithstanding the focus on these changes to offshore regulation, the most critical aspect that the Australian Government regulates is the safety of oil and gas workers. I recently visited a drill rig off the West Australian coast, and was inspired by the commitment and hard work of these people who spend months away from home. We must protect them so they can go home.

The Australian oil and gas industry is one of the safest in the world and it’s something we should be proud of. But it’s not something we can afford to become complacent about.

In the last year, NOPSEMA has reported 11 serious near misses and 4 serious incidents. We are on track for the worst safety outcomes since NOPSEMA came into existence.

I recognise that these latest results follow a decade of improving safety performance but we cannot afford what at the moment is a statistical uptick to turn into a trend.

These figures should stop every CEO in their tracks and this should make it to the highest level in the boardroom for every oil and gas company operating in Australia.

We must not backslap each other on the great progress that has been made. Instead we should be making sure that every measure is taken, every day, to prioritise safety.


On the issue of the PRRT, I can assure you the Government understands this is an important issue and we will consider our response carefully and methodically.

Australia has an outstanding reputation as an investment destination for resources sector projects and it is important for us to not only maintain our position, but to balance the need to ensure the Australian community receives a fair return on the development of our resources.

I know all of you have participated constructively in this review and consultation process. Thank you for your engagement on this issue.

We understand the importance of our resources, oil and gas sectors in term of regional jobs, regional economies and national revenue. We want to ensure Australia continues to attract future investment.

The Government carefully weighs the informed and constructive views you have expressed. This comprehensive consultation will be reflected in the Government’s response.


I want to finish by once again thanking the industry for your cooperation with the Government in response to what has been a challenging 12 months for energy policy.

I know it can be distracting and frustrating to have to come to Canberra and respond to politics. Just take comfort in knowing that you have to do it less than I have to!

But it also indicates how important your industry is to our country and to our future. It is a fascinating industry and I learn something new every day as the Resources Minister.

You have some of smartest people in business working for you. I noticed in your conference documents that last year's winner for the "Best Poster Presentation" was titled "Polynomial amplitude versus azimuth inversion in horizontally transverse isotropic media". And that's just the POSTER competition!

Not since I studied post modern English literature theory have I been more confused by a title!

Your industry covers ground from the technical right through to the political. It takes nimble and adaptable leaders to navigate such a field and once again I thank APPEA for your cooperation over the past year and look forward to working cooperatively again over the next year. All the best for the conference.

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