APPEA - adding gas to the mix

APPEA Chief Executive Belinda Robinson.

APPEA Chief Executive Belinda Robinson.

‘Climate change’ and ‘energy’ are three buzz words around which the world now turns. In Australia, gas is frequently added to the mix. Australian Petroleum Production & Exploration Association (APPEA) Chief Executive, Belinda Robinson, spoke with Gas Today about the future of the Australian gas exploration and production industry.

Ms Robinson says that, without a doubt, climate change is the most important issue currently facing the gas exploration and production industry.

Representing 98 per cent of Australia’s petroleum production and the majority of its exploration, Ms Robinson has good grounds to suggest that the challenge climate change poses for the Australian economy is great and underestimated.

“I think climate change policy is one of the most, if not the most significant economic reform that this country has ever gone through; that it’s going to touch every business, every household, every individual and I just don’t think that we can underestimate the impact of the policies on the way we do business, and Australia more broadly,” she says.

The challenge, she continues, is to get the policy settings right; policy settings that are underpinned by a commitment to achieving emissions at least-cost while encouraging all potential greenhouse gas abatement options.

For Ms Robinson, gas is not a transitional fuel. Gas should be front and centre of Australia’s energy future for many years to come. Why?

“One is because it’s got half the greenhouse gas emissions to coal so it lends itself to base load power,” she explains. “It’s extremely flexible – you can use it in your car, use it for heat; it lends itself to the building of small units, so it lends itself to distributive generation projects; it’s reasonably cheap, quick and easy to build – you can build it in modular form; and, Australia has a lot of it.”

With three gas markets – the Northern Territory market, the West Coast market and the East Coast market – Ms Robinson says the country has at least 110 years-worth at current rates of production. And despite concerns over domestic supply, the country has not reached the stage where the industry needs to focus on tapping into its tight gas reserves.

Ms Robinson says that the shortage of supply on the west coast is not due to insufficient gas and the state government is exploring all manner of gas supplies – including tight gas – to address the problem. After all, she explains, the West Australian government has a legitimate desire to make sure that the domestic market has access to competitively priced supplies of gas for the long term and believes that tight gas may be part of that.

“But in terms of Australia as a whole, we do have plenty of gas,” she says. “It’s really all about making sure that the market works appropriately so that the gas can be brought online at the time when people require it.”

With so much gas, Ms Robinson disagrees that it is a transitional fuel. Gas is a fuel of the present and the future.

“We think it has a very, very strong role to play in assisting the Australian economy make the transition to a low carbon economy, she says, clarifying that this is different to gas as a transitional fuel. “We think gas is there for the long haul; it’s not a transitional fuel at all. It’s a long term fuel but it is very well placed to make a substantial difference to Australia reducing its greenhouse gas emissions, particularly through its use for electricity generation.”

It is in the approach to reducing emissions, that Ms Robinson says governments need to pay more attention to getting policies right. Asked what the future holds under the Federal Government for Australia’s gas exploration and production industry, Ms Robinson chooses not to delve into mysticism.

“What the future holds and what we would like may or may not be the same thing,” she concedes. “We would like to see natural gas find its place in an increasingly carbon constrained economy. To achieve that we would like to see a well designed emissions trading scheme unaffected by other greenhouse policy measures.”

Late last year, APPEA stated that the potential of Australia’s natural gas and other low-cost abatement options to immediately address the massive challenge of reducing Australia’s greenhouse emissions will be curtailed by the introduction of a renewable energy target.

“We would like to see a commitment to maintaining the integrity of an emissions trading scheme,” Ms Robinson explains. The association is concerned that policies such as the renewable energy target will undermine the integrity of that policy and shift the focus away from reducing greenhouse gas emissions at least cost to, essentially, an industry development scheme.

In an emissions trading scheme governments cap emissions and those who buy and trade emissions can find the least-cost way to meet the requirement to reduce emissions.

“But with a renewable energy target superimposed on top of that,” explains Ms Robinson, “a great chunk of that market is carved out and handed over to the renewable energy industry, leaving a much smaller market for natural gas, for energy efficiency measures, for offsets, and for all the other ways and means for reducing emissions. And our modelling tells us that that will switch away approximately 19,000 gigawatt hours of gas, and unnecessarily increase the price of electricity.”

In terms of reform and new policies, Ms Robinson says APPEA would like to see new policies with incentives to encourage companies willing to take the risk and wear the very high costs associated with frontier exploration. Streamlining regulation and project approvals processes is also a priority. APPEA recently welcomed the Productivity Commission’s ‘Annual Review of Regulatory Burdens: Primary Sector’, which confirmed the industry’s finding that there are numerous levels of regulatory duplication in the approvals process for the development of Australia’s energy resources.

In terms of LNG, Ms Robinson explains that there are a number of LNG projects on the drawing board that APPEA hopes are converted to a reality.

“We would hope,” she stresses, “that the Government would take a very close look as to why these projects are not getting up in a very high cost environment; and would look at how competitive Australia is with the rest of the world with LNG production.”

In its ‘Platform for Prosperity: Australian Upstream Oil and Gas Industry Strategy – Strategic Leaders’ Report’ – released in April 2007 – APPEA outlined its targets for the decade to 2017 dealing with gas. These are increasing LNG production capacity from 20 million tonnes a year in 2008 to at least 50 million tonnes a year; a doubling of natural gas use for industrial purposes and as a competitive feedstock for resources processing; and, having 70 per cent of all new electricity generation capacity installed in Australia, gas-fired in a competitive electricity market.

More generally, Ms Robinson says that for 2008 and beyond, APPEA’s main goals are to inform the Federal Government of all the issues around upstream oil and gas; educate the government on the difficulty of getting larger LNG projects up, and maintain the integrity of an emissions trading scheme so that gas can find its right and proper place in assisting Australia make that transition to a low carbon future.

And in a vote of confidence for the industry, Ms Robinson says “Internally, we will be working on a strategy to ensure we have a sufficient pool of adequately trained and skilled people from which to draw so that we can support the growth in the Australian industry that we know Australia is capable of.”

Enter your details to subscribe to the free fortnightly Gas Today e-newsletter

Thank you for signing up for the Gas Today Online Update.