23 May 2023

Transcript: APPEA Chief Executive Samantha McCulloch interviewed about Net Zero Zones on ABC Radio SA

Interview with SA Late Afternoons Host Narelle Graham on ABC Radio South Australia and Broken Hill

Narelle Graham: It’s worth exploring some of the discussions that happened at the APPEA 2023 Conference and Exhibition last week over in Adelaide. It was held in South Australia. Next year it will be in Western Australia. One of the things that has happened in this space – Adelaide to Port Augusta and the Cooper Basin have been flagged as potential Net Zero Zones, where – well, here’s how I read it – carbon emitting industry can continue, but be offset by carbon capture, utilisation and storage. Samantha McCulloch is the Chief Executive of APPEA. She had a major role in the conference. Samantha McCulloch, good afternoon.

Samantha McCulloch: Good afternoon, Narelle. Thanks for having me.

Graham: I don’t suppose you have had a budgie that you taught a trick?

McCulloch: No, no budgies, I’m afraid (laughs). Just dogs.

Graham: Did you teach the dogs any tricks?

McCulloch: Ah, just to behave… he was a giant Great Dane. 75 kilos so it was important that he was well trained. Yeah, I imagine training a budgie is probably a little bit more challenging.

Graham: Yeah, well, they can fly away if they, you know, if they’re not interested. I’ve never trained a budgie you to do anything. I did have one very briefly. But anyway…

So, let’s talk about this conference that happened in Adelaide and the future of the petroleum and gas industries. First of all, what is a Net Zero Zone? Is my description close – an area where carbon emitting industry can continue and then it can be offset by carbon capture, utilisation and storage?

McCulloch: Yeah, well, Thanks, Narelle. You’re close in the sense that what we did with our analysis and report was really look at opportunities to fast track that path to net zero for key regions. So, we took a national level to start with, looking at, for example, where is heavy industry, where are those safeguard facilities and the emissions from the safeguard facilities. So that’s part of the you know, the Federal Government program to reduce emissions from the industrial sector. And how do we work together to be able to reduce emissions. And we identified the key building blocks are really around renewables, of course, around natural gas, low carbon fuels like hydrogen, but also carbon capture and storage. And because these are the building blocks that can support decarbonisation across different facilities, working together with shared infrastructure, so this carpooling of carbon in the case of carbon management, infrastructure and carbon capture and storage, we see is a really important opportunity. And so this is a first step in analysis and work that we’re doing as the oil and gas industry to really identify how we can support not just our industry but other industries in reaching net zero.

Graham: Carbon capture and storage is underway at Moomba in South Australia. Where an area is used for that CCS, can it be used for anything else? For example, can you build a house on it? Or are we creating an area that can’t be used for anything other than carbon capture storage?

McCulloch: So, when we’re talking about geological storage, this is carbon dioxide that’s being stored very deeply underground in geological formations, so,, as much as two kilometres under the ground. In the case of Moomba, the CO2 is being stored in reservoirs that have held natural gas for millions of years. So we know these facilities can hold gas. It’s almost like thinking about the oil and gas industry in reverse. So, we’re putting the carbon back where it came from. What we have seen from international experiences actually having that infrastructure in place, and that abatement solution, actually becomes a magnet for other investment. So if you’re looking at building a steel plant or any other kind of emissions intensive facility or industrial plant, you want to know that you can do that in a low emissions way and having that infrastructure in place has made a key point in terms of decision-making for relocating facilities, for building new facilities, for opening up new opportunities around low carbon hydrogen, for example, so you can make hydrogen with natural gas, with CCS. If you know you’ve got the CO2 storage in place, you can build that hydrogen facility. And also what we have seen from international experience is the opportunity for carbon removal. So, we can also take CO2 directly out of the air through direct air capture technologies, and you would do that where you’ve got that storage infrastructure in place. Even at Moomba, it’s really exciting technology. They’re looking at doing trials of direct air capture technology, so that would actually be carbon negative.

Graham: It’s like a moth to a flame by the sounds of things. You know, you would have an area of carbon capture storage, and therefore you would have other industries that would come about around it. So if this was an area for good storage, a steel plant might emerge. And so, therefore, yes, two kilometres underground could be the carbon being stored but above it would be a steel plant.

McCulloch: Yeah, for sure.

Graham: So we’re not creating an area like where we’re, you know, it’s a landfill zone and nobody else is going anywhere near it. We’re creating an area where a lot of stuff’s going on underground, and then there’s a lot going on, on top of the ground also.

McCulloch: It can support those new industries but also we can support existing industries. So in these regions that already have a lot of heavy industry that are carbon intensive, providing that carbon abatement solution for those facilities, whether that involves a pipeline or building a CO2 storage facility if the reservoir is compatible, and then geology is compatible… you know, you can protect those existing jobs, those existing industries, they can continue to thrive, but in a way that’s still compatible with net zero and reducing emissions.

Graham: Samantha McCulloch is the Chief Executive of APPEA. That’s the Australian Petroleum Production and Exploration Association. Just to let people know, we are talking carbon capture and storage. Samantha is an expert in that field – seven years as the Head of CCUS (at the International Energy Agency). Is it not too expensive?

McCulloch: The costs of CCS really depend on what application. So often CCS has been described as the Swiss Army knife of abatement because you can apply it to different facilities and in different locations and it depends on some of the specifics of the projects as to how much it costs. But we have cases where CO2 can be stored for around $US20 mark, depending on the facility. You can capture the CO2 from some facilities for under that $US20 mark if you get a nice pure stream of CO2 from wherever you are capturing it from. It does get more expensive as you get into applications where the CO2 is a bit more dilute. So that could be other industrial facilities, power generation. If you want to take it directly from the air, that’s the most expensive because it’s the most dilute source of CO2. But what we are seeing is that with new ways of deploying this technology, clearly being able to have the shared infrastructure, where you get economies of scale, where you reduce the complexity, that can bring down the cost. Also, just through deployment and more commercial experience. We’re seeing costs will come down. We expect the costs will come down in the same way that we’ve seen costs come down with other technologies.

Graham: Your closing address at the Conference – you spoke of optimism for the future for 20-30 years and beyond. When we’re talking gas and petroleum, should there be a future – you know, the push is towards winding up petroleum and gas?

McCulloch: Absolutely. Gas is going to play such an important role in the decades to come. It’s key for transitioning for net zero. In the near term, we’re seeing an increase in demand and the call on gas because of its important role in power generation, where it’s stepping in as this reliable partner for renewables. And as we’re moving away from coal, gas is helping to fill that void. Gas is still a key fuel for most of our manufacturing. 40% of our manufacturing relies on gas today, but it will continue to provide that important, reliable energy for manufacturing and heavy industry. But when we look even more broader, the opportunities that can be underpinned by our gas resources – low carbon hydrogen, development of CCS technologies – this ensures a really important role for natural gas but also the oil and gas industry in terms of Australia’s future. And I would point out – I did just spend seven years at the International Energy Agency – and in net zero scenarios, we still have fossil fuels. So today we’re about 92% reliant on fossil fuels for energy in Australia. Even in a global net zero scenario, at the point of net zero in 2050, there’s still around 20% of the energy mix being supplied by fossil fuels, and that includes natural gas. So there’s a long term role for gas in our energy mix.

Graham: But no future for it without carbon capture storage?

McCulloch: No. Carbon capture and storage will absolutely play a role but even in, for example, being that reliable backup in power generation, that’s a really key role. And it’s used as a feedstock in some industrial applications as well. That’s why CCS continues to be an important part of the energy mix. In fact, the oil and gas industry is really central to be able to not just deploy this technology but to support the production and distribution of cleaner fuels like low carbon hydrogen, but also investing in these big infrastructure projects that are key to supporting net zero goals. The industry has a wealth of experience that it can bring to the net zero solution.

Graham: There will be people across South Australia concerned about future exploration for gas. If we transition, we need more natural gas, as you’re saying, that means we need new sources. Does that mean more exploration and does that mean fracking?

McCulloch: We’ve seen, actually, exploration for petroleum resources in Australia really decline in recent years. I think it’s down around 80% from around 2013-2014. This is a concern because actually in Australia, and particularly on the east coast, there’s projections of supply shortfalls, we’re not investing enough in the exploration and development of new resources to be able to meet demand. And we need to be in a position to ensure that we’ve got adequate, reliable supply of gas to continue to fuel households and industry. So that investment in exploration is actually really key and something that we’d like to see enhanced actually, to ensure that we can continue to have that reliable energy but also capture some of the economic opportunities that natural gas delivers not just for the South Australian state but nationally.

Graham: OK, so you would like to see more gas exploration in South Australia and then to extract it are we talking about fracking?

McCulloch: There are different ways of producing gas, of course, and in South Australia conventional gas development at the moment and that’s bought huge economic opportunities actually in terms of the South Australian economy. It’s around $38 billion of economic activity annually. There’s about 11,000 jobs associated with the gas industry. And actually maintaining and developing that is a really important opportunity for the state, while ensuring reliable energy. The key to having reliable affordable energy is ensuring that consistent supply and consistent investment in exploration and production of natural gas.

Graham: So we’re going to have to find new sources?

McCulloch: Yes, there is absolutely, when we look at it and this has been confirmed by the ACCC and the Australian Energy Market Operator, that the demand for gas is there. It’s strong, and we need to be investing in new supply to be able to meet that demand because no one wants to be in a situation where we’re seeing, you know, blackouts and brownouts or gas supply shortages. We want ample reliable affordable energy for Australian households and industry and that does require that investment in new supply.

Graham: Samantha McCulloch is the CEO of APPEA. I just might get your response to what’s been in the news today and that is that the head of the State Government’s hydrogen agency, Sam Crafter, has told a parliamentary committee that the hydrogen plant to be built near Whyalla is more likely to be in the hundreds of tonnes rather than the thousands of tonnes. So it was set to have 3600 tonnes of storage attached to it.

This is Sam Crafter: “We are in the market, we are under evaluation, we’ve got storage as a part of that, and we’re considering all the options that come back to us. So obviously, I can’t rule anything in and out. But I guess I think the work that we’re doing is leading us more towards this daily operation of the plant and therefore a different storage number.”

What does that mean for people like, like your organisation, like APPEA, now we’re looking at something smaller, smaller storage than what the government was talking about 12 months ago?

McCulloch: I haven’t actually seen those comments, but I think this goes to some of the challenges of deploying new fuels and new technologies. And, again, the importance of ensuring we still have reliable supply of existing sources, so ensuring that we still have the natural gas in the mix. In terms of hydrogen, hydrogen is a known fuel – there’s around 95 million tons of hydrogen that’s produced globally each year – but less than 1% of that is low carbon hydrogen. So the scale up and the technology, challenges and opportunities for that are still significant. And we’re seeing that with some of the early projects that are being developed. So I don’t know the details of what was announced in terms of the changes to the applications of the plant in Whyalla, but we still see hydrogen as being a really key fuel for our net zero future. It’s one of those pillars that we need to decarbonise and have a lot of optimism around its potential.

Graham: Samantha McCulloch there, thank you, CEO of the Australian Petroleum Production and Exploration Association.