24 Aug 2022

Speech: APPEA CEO Samantha McCulloch address to SEAAOC in Darwin on the future role of oil and gas

South East Asia Australia Offshore & Onshore Conference (SEAAOC) Darwin 2022

The Role of Oil and Gas in the Cleaner Energy Future

I’d like to begin by acknowledging the Larrakia people and thank you for the wonderful welcome to country this morning.

It’s an exciting time for the oil and gas industry and I am proud to have recently taken up the role of APPEA Chief Executive – the voice of our members who are at the forefront of one of the great challenges of our time: rapidly reducing emissions to ushering in our cleaner energy future while continuing to ensure energy security, affordability and access.​

We as an industry are ready, willing and already addressing those challenges while remaining a pillar of the Australian economy. The industry enables almost $500 billion of economic activity annually.

This is particularly the case here in the Northern Territory, where the total gas industry supply chain supports over 11,000 full time jobs and more than 3,000 businesses. That’s the drillers and explorers, the workers who build and maintain pipelines, the gas company employees who deliver reliable energy to customers, the gas fitters in our towns, and the gas bottle retailers in our suburbs selling our product for barbecues and camp stoves.

To put this into perspective, about 11 jobs in every 100 are being supported by the gas industry supply chain in the Territory. That is the highest concentration of gas industry workers in Australia – even more than Western Australia.

But given the interwoven relationship our sector has with the nation and its economy, the oil and gas industry is not just about what we are doing in our own businesses. Many people don’t realise it, but we unlock and support other major industries like transport, mining, manufacturing, and small businesses.

We help them to make building products, keep our country moving and facilitate general economic growth by powering businesses and homes. Further, many of the everyday products we all use in our lives are made with oil or gas – from medical equipment in hospitals to tech equipment like cameras and cell phones.

It is because of this intrinsic relationship with the nation that the oil and gas industry will be central to efforts to meet Australian and global climate goals. APPEA members have committed to net zero by 2050 and are investing in the projects and technologies needed to deliver substantial emissions reductions.

The Northern Territory is already a big part of this push and will continue to play an important role in the future.

Firstly, the liquefied natural gas export cargoes that leave Darwin Harbour show how this part of the world can play its part, delivering cleaner energy to our neighbours in Asia and providing a reliable alternative to higher emitting fuels like coal for electricity generation.

This was acknowledged in a Federal goverment report highlighting that Australia’s LNG exports have the potential to contribute to a global reduction in emissions of up to 166 million tonnes every year by replacing higher emitting fuels. That’s one-third of Australia’s annual emissions, every year.

In addition to the emissions reductions, the switch from coal to gas in these fast-growing Asian economies is helping boost air quality and lift the living standards of hundreds of millions of citizens.

This reality should put paid to the argument that Australia can’t make a difference beyond symbolism when it comes to climate change.

Darwin is playing a particularly important role given its proximity to Asia, as well as its existing energy infrastructure. There is a huge market and demand for gas on a doorstep – and for future fuels such as hydrogen – and we must seize this opportunity and the competitive advantage our proximity to Asia affords us.

Secondly on the decarbonisation journey, natural gas is underpinning the transition to renewables by providing firming capacity to support intermittent renewable generation.

In many ways, we saw this happen on the east coast of Australia during this past winter when renewable energy failed to input enough power amid coal-powered generation outages.

Solar-powered generation was down sharply due to bad weather and it was gas that stepped up, firming the electricity grid and literally keeping the lights on for the east coast of Australia. During this time, the industry ramped up gas supply to the domestic market to meet demand that had increased by 55 percent relative to the same period last year.

Although natural gas remains the primary source of the Northern Territory’s electricity generation, renewables will continue to be integrated as the government seeks to reach its target of 50% renewables for electricity generation by 2030.

We support this renewables growth. Renewables will be a central pillar of meeting our energy and climate goals. As the gas industry, we believe it’s all shoulders to the wheel to get to net zero. Many of our members are already integrated energy companies, having invested billions in technologies like solar and wind power.

The cleaner energy future will be a partnership of natural gas supporting and stabilising sources like wind, solar and hydro energy. As the Federal Resources Minister Madeleine King said recently, gas is the “natural ally” of renewables.

This is not just a political conclusion. It has been repeatedly confirmed by energy authorities like the International Energy Agency and, closer to home, the Australian Energy Market Operator in its recent Integrated System Plan.

Citing the mid-2040s as a time when gas would back up electricity largely powered by renewable generation after the retirement of coal-fired power, AEMO said gas would still be required during periods of high renewable output at times of peak demand, just after sunset and during the night to cover wind variability.

The ability to use natural gas when there is insufficient renewable energy available will be crucial to ensuring Territorians maintain reliable and secure energy.

There is no absence of scientific – and practical – evidence to support this critical role. From the former Chief Scientist to the IEA to the South Australian experience, it is undeniable that our industry can – and is– the key to more effective renewable uptake.

Russia’s invasion of Ukraine has highlighted just how important this is, with countries resorting to coal because they don’t have a secure gas supply.

The industry has a long and enduring commitment to Australia and to continuing to deliver energy security domestically and in our region. We have announced over $20 billion of new investments in supply nationally in the past two years. We stand ready to invest more but we need certainty and the investment policy settings must be right.

It is timely to reinforce that while the world confronts a global energy crisis, our members remain committed to their domestic obligations. Importantly, we can do both – we can meet our local commitments as we have also done, we can responsibly develop new supply and we can maintain the confidence and support of international investors who have underpinned our extraordinary efforts for so many decades.

The third way the oil and gas industry is decarbonising is by investing billions in emissions reduction technologies and cleaner fuels – from carbon capture and storage to hydrogen, as well as renewable energy projects.

This is another area where we have a global competitive advantage. We have this head start in a new cleaner energy sector because of our technical expertise and knowledge, established trade pathways, ability to work at scale, understanding of geology, and access to existing pipeline and storage infrastructure.

The Territory, in particular, has an opportunity to play a big part in this and to become a world-leader in low emissions energy – an opportunity that was reinforced by Minister King’s announcement today awarding the INPEX-led Bonaparte CCS Assessment Joint Venture acreage in the Petrel Sub-Basin.

The growing and important role that CCS is playing in decarbonisation is well-recognised by the international energy community, and one that I am particularly familiar with.

Just a few weeks ago, I concluded my role in Paris with the International Energy Agency as the Head of Carbon Capture Utilisation and Storage (CCUS).

The IEA is just one of the many institutions that recognises tools like CCUS are crucial to reaching net zero greenhouse gas emissions by 2050.

CCUS is a proven technology that the oil and gas industry has been using for 50 years; over the next decade there will be many more CCUS projects in Australia; and the oil and gas industry will play a central role given our expertise in geological storage and large infrastructure projects. We have the subsurface expertise, the geologists and reservoir engineers that can support the safe development of these storage sites.

Here in the Territory, plans for the CCS Hub at the Middle Arm precinct near Darwin will supercharge the local economy and position the Territory as a world-leader in manufacturing and low emissions energy. We look forward to collaborating as an industry with governments on this exciting project which is set to create local jobs and help a raft of industries decarbonise.

It brings together all the unique elements that only our industry can deliver – reliability, technology and a commitment to regional benefits.

CCUS is not only an opportunity to reduce emissions during gas production but will be critical for some industry sectors including steel, cement and chemicals. It can also facilitate our hydrogen industry, through leveraging our industry’s existing skills, expertise and commercial relationships, as well as existing technology and infrastructure.

Under the International Energy Agency’s Net Zero by 2050 scenario, almost 40 per cent of hydrogen in 2050 will come from natural gas utilising CCUS. In fact, our trading partners who purchase our LNG today are likely to be the same partners who will buy our hydrogen tomorrow.

All this underscores the point that, contrary to some perceptions, the transition to net zero will expand the role for national gas while creating new opportunities for the industry.

One exciting new opportunity for the Northern Territory to develop its natural gas industry is the development of the Beetaloo Basin.

Research from Deloitte Access Economics found that developing the Territory’s substantial shale gas resources could create up to 6,300 long-term jobs and generate up to $1 billion in additional revenue for the Northern Territory Government over the next 20 years.

In fact, there are already local contractors and workers benefiting from the economic activity generated through exploration in the Beetaloo Basin.

Tens of millions of dollars of contracts have already been flowing into the NT courtesy of Beetaloo exploration as our members collaborate with local communities and traditional owners to manage this phase.

Critically, they are also ensuring this region’s important environmental assets are protected, fulfilling the verdicts of over a dozen inquiries, reviews and studies that have found any potential risks can be managed safely.

There is a lot of noise and wild claims about this issue but we must follow the science and I back the recent comments of the NT Deputy Chief Minister when she warned that misinformation about the Beetaloo was a risk to getting the best outcome for Territorians.

One of our members, Origin Energy, spent $9.6 million with NT businesses out of a $39 million exploration program between March 2021 and February this year.

Fellow member Santos spent $60 million with NT-based contractors and companies during last year to support operations across the Top End, spending with 45 separate organisations in areas including rental services, accommodation, civil contractors, engineering and supply services, haulage, environmental and cultural heritage.

Empire Energy has invested $46.5 million in the NT, including $3.4 million in taxes.

Just look at the small businesses spanning the NT already benefiting from this investment in the Beetaloo. There’s Silver City Drilling in Alice Springs, Darwin-based Rusca Brothers, Arnhem Earthmoving and Mechanical, and KD Machinery Hire at Broadmere Station. These companies – and many others – are benefiting from one of the biggest economic opportunities the Northern Territory has seen.

It’s this sort of stimulus into communities across the NT that shows again how important the industry is to NT way of life, even before the Beetaloo ramps up into production in coming years.

The Beetaloo Basin has the potential to be as important economically to the NT as the great resource development regions of Queensland and Western Australia – delivering billions in public funding to build schools and hospitals; providing energy security to households and businesses; feeding existing export facilities; and potentially driving a manufacturing hub in this region.

And, as I have explained, it will also help natural gas decarbonise the world in the cleaner energy future.

It is a bright future, and one in which we are focused on leading the way.

Thank you for your attention.