Time to face the facts on the need for natural gas

APPEA Board Director Bruce Lake.

APPEA Board Director Bruce Lake.

Gas has never been more important to Australia’s prosperity, but it has also never been so aggressively challenged.

There is a chasm of understanding between the objective facts and so many of the media stories.

The facts point to a growing reliance on gas, especially unconventional gas, and a pressing need to stimulate exploration and development to supply Australia and the world.

Yet much of the media implies or even baldly states that gas is unnecessary and dangerous.

Facts are missing.

The real choices we face are ignored, because the truth is more complicated than some people wish to recognise.

Despite the scare campaigns, every genuinely independent expert inquiry has concluded that environmental risks can be safely managed through good industry practice and effective regulation.

APPEA’s case for the industry is based on three compelling arguments:

  • Gas delivers lasting economic benefits to Australia, especially to regional communities;
  • Gas has a unique role in the transition to a cleaner energy future; and
  • Oil and gas will continue to be essential – as fuels and feedstock – for our economy.

It may seem strange that our industry must explain its economic importance.

The raw statistics are powerful:

  • The value add for the oil and gas industry is far higher than most industries — 70c in the dollar;
  • The sector’s wages and salaries are also high; and
  • The industry is already producing $17 billion in exports.

Our industry is not just a resource industry.

It is also a sophisticated manufacturing and services industry.

Yes, the number of jobs shrinks as construction projects wind down.

But the industry and its supply chain are still likely to employ about 55,000 to 65,000 people in highly skilled, well-paid jobs.

By 2020, Australia’s hydrocarbon production should exceed the Gulf of Mexico’s.

Today our industry represents about 2.1 per cent of Australia’s GDP, contributing about $35 billion to the national economy.

By 2030, that contribution is projected to be about $67 billion. As our industry achieves a truly global scale there is great potential to grow the local supply chain.

McKinsey estimates that a further 10,000-15,000 jobs and $1 billion in exports could be generated.

The second part of our case is that gas must be part of the transition to a low-emissions future.

Gas is ideally suited to complement renewable energy.

Unfortunately, this is not widely understood in the community.

While we are seeing steady improvements in storage technology, the power generated by wind and solar sources is intermittent – it often declines at times of peak demand.

In contrast, gas-fired generation can respond quickly to changes in renewable output and market demand.

As renewable energy’s share of the mix rises, we need more gas to support security of supply.

Increasing the proportion of gas-fired generation in the energy mix is an important step to a cleaner but still secure energy supply.

However, the opposite trend is occurring in eastern Australia.

Gas’s share of the market has fallen to only 12 per cent.  And it is likely to fall further.

Gas is being squeezed out of the market by cheaper coal-fired plant and subsidised renewables.

This is a perverse policy outcome.

The final part of the industry’s case is that gas is not just a fuel.

It is also a feedstock for manufacturing essential items such as glass, fertilisers, packaging, chemicals and plastics.

Many people will have seen stickers stating ‘you can’t eat gas’.

But it would also be difficult to grow food without fertilisers or sell food safely without packaging.

The survival of a large part of our manufacturing sector relies not only on competitively priced energy but also on a secure supply of gas as a feedstock.

This is especially true in Victoria.

More than a quarter of the gas consumed by industry in that state is used as a feedstock.

Our friends in the manufacturing sector know that their competitiveness depends on secure, affordable gas.

For that reason, APPEA, the Australian Industry Group and the Plastics and Chemicals Industry Association have written to the Victorian government.

We have warned it that continuing with the political moratorium on onshore gas development in that state threatens the future of manufacturing.

This is the broad case APPEA is making.

Somehow, people of good will across industry and politics must rebuild the bipartisan consensus that Australia needs a responsible, growing resources sector.

Public policy must be based on the public interest.

Governments must support independent science – and ensure that facts are readily available to the community and prominent in the public debate.

That does not mean launching further studies to evade making decisions.

We appeal to governments to:

  • Respect the advice of the independent experts;
  • Work with industry to minimise risk; and
  • Keep the debate factual.

APPEA is looking to the Council of Australian Governments Energy Council for collective, bipartisan leadership.

The alternative is a race to the bottom as several states opt out of their shared responsibility to support local industry and customers.

 

Bruce Lake is Chairman of APPEA and Managing Director of Vermilion Oil. This is a condensed version of his speech on the opening day of APPEA 2016.

This article originally appeared on www.appea.com.au

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