Introduction
We note that this report of the Senate Economics References Committee (the committee) into Australia's oil and gas reserves covers an extremely wide subject area. Whilst there are points of emphasis and characterisation of evidence in the committee report with which we differ, we have focussed on the recommendations contained in the report.
Recommendation 1—Benefit to all Australians and Domestic Gas Reservation
This recommendation contains two limbs.
The first limb of the recommendation calls upon the Australian Government to consider the benefits of the oil and gas industry and to consider whether there are opportunities to develop and diversify the industry 'for the benefit of all Australians'.
The oil and gas industry generates substantial benefits for all Australians. These are detailed in the submission from the Department of Industry, Innovation and Science (DISER). To quote from the Department's submission:
Australia's oil and gas industry is a major multi-billion-dollar contributor to Australia's prosperity, energy security, employment, and terms of trade. Investment exceeding AU$340 billion in Australia's oil and gas sector since 2009 has fuelled opportunity and growth.
The Government recognises the benefits of the oil and gas industry. It is commendable for the Government to continually look at ways in which that benefit can be maximised for the Australian people.
The second limb of the recommendation calls upon the Australian Government to consider reviewing: 'the domestic gas security mechanism to ensure that it remains fit for purpose'.
In our view, the policy and actions of the Government in this regard evidence a pattern of ongoing review and consideration of this mechanism and related policy matters. This is with a view to ensuring that Australia has access to an ongoing supply of gas for domestic uses which is reliable, secure and at the lowest practical price. The policy initiatives include:
the Heads of Agreement between the Prime Minister and east-coast liquified natural gas (LNG) exporters which helps ensure secure and competitively priced gas supply for the east-coast domestic market. The current Agreement was signed in January 2021 and is in place until 1 January 2023. The Agreement requires east-coast LNG exporters to: (a) offer uncontracted gas to the domestic market before exporting spot cargoes; and (b) regard the Australian Competition and Consumer Commission's (ACCC) LNG netback price when offering gas domestically;
the Gas-Fired Recovery Policy of the Australian Government which (amongst other things) promotes the development of new gas resources in frontier onshore gas basins such as the Beetaloo Basin in the Northern Territory where the Government has invested $50 million to help speed up exploration and production in the area by approximately two years;
the finalisation of a Voluntary Code of Conduct to support the negotiation of gas supply agreements (GSA) which represented an important industry-led milestone under the gas-fired recovery. The Code helps to provide a level the playing field in the negotiation of gas supply agreements between gas producers and gas users. The Government called on the gas industry to develop a voluntary Code of Conduct as part of the September 2020 gas policy announcement; and
the release of the first full National Gas Infrastructure Plan (NGIP) and the Future Gas Infrastructure Investment Framework to help secure our gas supplies over the next 20 years. The plan and framework set out a long-term development pathway that locks in supply for households and manufacturers, and nominates five priority actions for east coast gas supply and infrastructure out to 2040.
Recommendation 2—Renewables and Hydrogen
Again, this recommendation contains two limbs.
The first limb recommends that the Australian Government consider supporting the diversification and transition to clean and renewable energy, including hydrogen. In our view, the policy and actions of the Government in this regard evidence positive steps being taken to facilitate Australia's transition to a net zero emissions position by 2050. The policy initiatives include:
the creation of the Australia's National Hydrogen Strategy as a plan to grow the industry and position Australia as a major player by 2030. The Government is investing more than $1.3 billion to accelerate the growth of the Australian hydrogen industry, the exports from which may directly support 16,000 jobs, plus an additional 13,000 jobs from related construction work, by 2050. Australian hydrogen production for export and domestic use could generate more than $50 billion in additional gross domestic product growth by 2050;
the incorporation of clean hydrogen as part of Australia's Long-Term Emissions Reduction Plan. Producing clean hydrogen under $2 per kilogram (H₂ under 2) is a priority stretch goal under the Government's Technology Investment Roadmap;
the Government's investment in ultra-low cost solar—with a stretch goal of clean electricity at $15 per Mwh – supporting low-cost clean hydrogen production. Ultra-low cost solar, as one of the six priority technologies under the Low Emissions Technology Statement 2021, will facilitate cost reductions for other clean energy technologies, including clean hydrogen, energy storage and low emissions materials;
investment of $464 million in the Clean Hydrogen Industrial Hubs program which supports the development of up to seven regional hubs across Australia where hydrogen users, producers and potential exporters are co-located. This lowers infrastructure needs and reduces costs, making the hub model an efficient approach to producing hydrogen at scale and increasing demand;
investment of $565.8 million in international partnerships, setting the foundations for Australia to be a major hydrogen exporter, by partnering with other countries. The Government is attracting investment, building supply chains and advancing research and development. Partnerships with countries such as Singapore, Japan, United Kingdom, United States and Korea will see Australia advance through investing in new hydrogen initiatives, exploring hydrogen supply chain possibilities and accelerating low emissions technologies. These countries are home to many commercial counterparties who have assisted in the development of Australian natural resources over decades; and
the Hydrogen Energy Supply Chain project (HESC) which aims to produce 225,000 tonnes of clean hydrogen each year in the Latrobe Valley. The Government's total commitment to the HESC project has been $57.5 million. It is estimated the 225,000 tonnes of carbon neutral liquefied hydrogen produced by HESC in a commercial phase will help reduce global emissions by around 1.8 million tonnes per year, or the equivalent of emissions from 350,000 petrol cars.
In addition to these initiatives, the Australian Government is also undertaking a range of other activities specifically in relation to hydrogen, such as:
completing a National Hydrogen Infrastructure Assessment;
reviewing national gas laws and considering the economics of using hydrogen in gas networks;
providing support for hydrogen pilots, trials and demonstrations;
working with Commonwealth Scientific and Industrial Research Organisation to support the Australian Hydrogen Researcher Network (AHRN) and collaboration on hydrogen research and development, including the HyResearch website; and
mapping future hydrogen workforce needs.
The second limb of Recommendation 2 calls for consideration to be given to ensuring that 'workers are not left behind' and posits that 'this could be achieved through measures like new energy apprenticeships to ensure that the necessary skills are developed'.
The Government has provided record funding to support apprenticeships. This was approximately $7.1 billion in 2021 alone. There have been a number of positive policy steps undertaken including:
the introduction of Trade Support Loans to support Australian apprentices in meeting everyday costs while they undertake their training;
the Australian Apprenticeship Support Network which delivers targeted informative support to apprentices through Department-contracted providers, operating from around 130 full time sites and with approximately 500 mobile field officers;
the Industry Specialist Mentoring for Australian Apprentices program providing intensive support to over 40,000 Australian apprentices in the first two years of training to improve completion rates and support the supply of skilled workers in industries undergoing structural change; and
the Australian Apprenticeships Incentives Program which provides incentives to assist employers who take on an Australian apprentice, particularly where the Australian apprenticeship is in a trade experiencing a skills shortage.
The National Centre for Vocational Education Research (NCVER) has recently found apprentice and trainee numbers continue to surge across Australia, up 27 per cent over the past year. NCVER also found annual apprentice and trainee commencements are at their highest level since 2014 with numbers increasing in all states and territories and across nearly all industry sectors. The official update found there were 341,385 apprentices and trainees in-training as of 30 June 2021, an increase of 27.5 per cent from the same period a year prior. For Australian apprentice graduates from the gas industry, employment outcomes are also high according to the NCVER National Student Outcomes Survey.
Senator Paul Scarr
Deputy Chair
Liberal Senator for Queensland
Senator Andrew Bragg
Member
Liberal Senator for New South Wales