5.1.1 A pipeline of investment
5.1.2 Our energy resource potential
Australia's energy resources sector has undergone a massive expansion since the last Energy White Paper in 2004. For most Australians, the physical manifestations of this growth are out of sight in regional and remote locations and, for many, out of mind. However, the economic benefits flow to us all.
Earnings from Australia's energy resource exports reached a record of around $70 billion in 2010–11, accounting for about one-third of our total exports in that year. This growth will continue: export earnings are forecast to be $82 billion in 2012–13 (BREE 2012b) and to grow at an average of around 4% per year out to 2034–35 (BREE 2011c).
While the continued expansion of the energy resources sector has added to pressures in some parts of the economy, it has also created valuable business and job opportunities in many supporting activities and in many of Australia's regional areas. The contribution of the sector to the economy is broader and deeper than is commonly appreciated. For example, in 2010–11 the black coal industry employed more than 48 000 people across Australia, and thousands were employed in supporting industries. The oil and gas extraction sector employed 13 000 (BREE 2012b), and that number is expected to increase sharply over coming years as several liquefied natural gas (LNG) projects enter the peak construction phase.
In financial terms, the energy resources sector also contributes significantly to the Australian economy. In 2011, the oil and gas sector contributed a total of $23.7 billion. Similarly, in 2011 the coal industry contributed $21.8 billion in direct value added (ABS 2012a). This stimulated a large indirect contribution to the economy through the industries supporting resource developments, such as the engineering, maintenance and construction, financial services, contract mining, mining services and transport and storage sectors.
It is undeniable that Australia is much better placed as an economy because of the continued development of our energy resources (Stevens 2011). The challenge is to sustain this economic success while also managing the resulting economic, social and environmental pressures so that its full benefits can be realised across Australia through coming decades.
5.1.1 A pipeline of investment
Energy resource development companies have announced a stream of Australian projects worth more than $290 billion. Of this, advanced energy projects account for $197 billion (BREE 2012e). Advanced energy and mineral resource projects are illustrated in Figure 5.1.
This investment is dominated by gas developments. Seven LNG projects under construction, valued at over $164 billion, will more than triple Australia's LNG export capacity from around 24 million tonnes to over 80 million tonnes per year (BREE 2012e), putting Australia on track to be the world's second-largest exporter of LNG in 2015 and potentially the largest exporter by 2021.
There has also been a suite of new investments in coal to expand existing operations and launch new developments. Increasing demand has meant that an entirely new coal precinct has opened up in Queensland's Galilee Basin.
In the past 10 years, around $30 billion has been invested to develop and improve port, rail and other export infrastructure to service our energy and mineral resource industries (BREE 2012f). This investment must continue to ensure that our export infrastructure keeps pace with the growing demand for our resources.
Figure 5.1: Advanced mineral and energy projects in Australia, April 2012
5.1.2 Our energy resource potential
Australia possesses abundant world-class energy resources. High-quality non-renewable energy resources are widely distributed across the country. With the exception of oil, they are projected to last well into this century at current rates of extraction.
Our renewable energy resources, many of which have yet to realise their full potential, and emerging unconventional energy resources and technologies also create almost limitless opportunity to diversify our energy mix and support the transition to a clean energy economy (see Chapter 6: Clean energy for details on how Australian Government policy is supporting the development of these important resources).
Unlocking this potential is challenging. There are resource-specific technical and economic barriers (for example, the challenge of deepwater drilling for oil and gas and constructing closed water transfer loop systems in deep hot rock formations), as well as environmental and social challenges.
The protection and management of Australia's important environmental assets is fundamental to the sustainable development of our onshore and offshore energy resources sector. Demonstrating that energy projects can operate safely and responsibly, particularly in environmentally sensitive areas and in harmony with other land and resource users, is essential for future resource development.
Coal is, and will remain, an integral part of Australia's economy through its contribution to regional economic and social development, the revenue it provides and its important role in underpinning our ongoing energy security.
A well-advanced pipeline of coal mining projects is under development, including $17 billion of investment already committed and around $40 billion under consideration. Another $10 billion has been committed for coal infrastructure such as rail and ports, with a further $38 billion under consideration (BREE 2012e).
Exports of thermal and metallurgical coal are expected to grow strongly to between 527 million tonnes and 689 million tonnes a year by the middle of the next decade (BREE 2012f). The domestic outlook for coal is also positive. Black thermal coal production is likely to remain strong through to 2035. Australia's brown coal industry, which has historically been tied to brown-coal-fired generation in the Latrobe Valley, rather than to export sales, faces potential decline over the longer term unless cost-effective emissions reduction technologies can be commercialised or alternative uses for the resource can be found (see Box 5.1).
Coal producers face continuing challenges, including co-development pressures, infrastructure bottlenecks and the need to adjust to carbon pricing. Recognising these pressures, the Australian Government has established transitional assistance arrangements under the carbon price package for 'gassy' coal mines, as well as for the highest-emitting power generators.
Box 5.1: The future of Lignite
Victoria's Latrobe Valley contains over 20% of the world's economically demonstrated reserves of lignite (brown coal). Lignite is a competitive source of energy for electricity generation and provides more than 90% of Victoria's supply.
While Victoria's lignite has very low levels of contaminants it has high moisture content (around 60%–70% by weight). This means that a significant amount of the energy is expended in evaporating the water in the coal during combustion. As a result, greenhouse gas emissions from brown coal are higher than those from black coal and other fossil fuels, such as natural gas.
The major challenge in exploiting these resources is in developing commercially viable technologies that can use lignite more efficiently, particularly by producing substantially lower net CO2 lifecycle emissions.
The Australian and Victorian governments announced the Advanced Lignite Demonstration Program on 3 August 2012 under which each party will contribute up to %45 million to fund upgrading processes for raw lignite that link to fully integrated lignite projects offering prospective end-use products and processes for many possible applications.
Technologies eligible for funding under the program must encompass coal upgrading and will include, but not be limited to, drying, dewatering, liquefaction, char production and separation. The program may also include funding for pre-commercial coal conversion technologies, such as combustion and gasification, where they are directly related to the pre-commercial coal upgrading technology.
The aim is to maximise the economic, environmental, technological and social benefits from the economic use of the Latrobe Valley's extensive lignite reserves while ameliorating environmental impacts.
The Advanced Lignite Demonstration Program will complement Victoria's first carbon capture and storage project, CarbonNet. The project aims to capture carbon emissions from power plants, industrial processes and new coal-based industries in the Latrobe Valley and store it in geological basins. Combined funding of $100 million ($70 million from the Australian Government and $30 million from the Victorian Government) will support feasibility work as part of the $1 billion plus CarbonNet project to demonstrate low-emission brown coal electricity generation in the region.
In addition, initiatives such as the Victorian Government's new brown coal market assessment have the potential to stimulate innovative forms of economic activity in regional Victoria.
The long-term sustainability of the thermal coal industry will depend on the successful commercialisation of carbon capture and storage and low-emissions technologies in Australia and elsewhere (government support for the development of carbon capture and storage technologies is outlined in Chapter 6: Clean energy). New technologies may also offer the opportunity for unconventional uses of stranded coal assets through synthetic fuel technologies, such as coal-to-liquids or coal-to-gas.
Australia has around a third of the world's uranium resources, and our identified resources have more than doubled over the past two decades (BREE 2012a). Our uranium makes an important contribution to the world's supplies of low-carbon energy.
Australia's uranium exports were worth $610 million in 2010–11 and are expected to continue to grow to 2012–13.(BREE 2012b). The size of Australia's uranium deposits and the number of new projects in the planning stages suggest that there is potential for further expansion in coming decades despite the recent decision on Olympic Dam.
Uranium is currently mined in the Northern Territory and South Australia, and new projects are under development in Western Australia. In March 2012, the New South Wales Government lifted a ban on uranium exploration in that state, which brings it into line with Queensland in allowing exploration but not mining. To support further exploration and development, the Australian Government encourages New South Wales and Queensland to consider lifting their bans on uranium extraction in future.
Our uranium resource base, combined with our mining expertise and leadership role in nuclear non-proliferation, means that we have the potential to increase production and exports over this decade to a level commensurate with our resource endowment. In increasing our market share, the sector faces challenges similar to those in other resource sectors, but also some sector-specific challenges.
One is the transport of uranium, which is currently shipped out of the ports of Adelaide and Darwin. Since 2008, the number of global shipping routes available to Australian producers has declined. Australian governments and the industry are working to achieve national consistency in transport regulation for uranium, including by opening up additional ports (particularly on Australia's east coast) and increasing access to international shipping routes to better meet international demand and improve competitiveness.
Natural gas is Australia's third-largest energy resource after coal and uranium. Our reserves of conventional and unconventional gas are located across the country. Most conventional gas deposits are offshore in north-western Australia and Bass Strait, while coal-seam gas (CSG) and shale/tight gas can be found in most Australian states and territories.
Australia has identified gas resources of 431 706 petajoules (PJ), or 392 trillion cubic feet (tcf) (Table 5.1), of which economic demonstrated reserves account for 149 305 PJ (136 tcf). This is around 184 years of gas at current production rates. There are additional potential in-the-ground CSG and shale gas resources of around 694 488 PJ (631 tcf), although those resources remain relatively poorly understood and quantified (RET, GA BREE 2012).
Table 5.1: Total Australian gas resources
|EDR||113 400||103||35 905||33||–||–||–||–||149 305||136|
|SDR||59 600||54||65 529||60||–||–||2200||2||>127 329||116|
|Inferred||–11 000||–10||122 020||111||22 052||20||–||–||155 072||141|
|All identified resources||184 000||167||223 454||203||22 052||20||2200||2||431 706||392|
|Potential in ground resource||unknown||unknown||258 888||235||unknown||unknown||435 600||396||694 488||631|
|Resources—identified, potential and undiscovered||184 000||167||258 888||235||22 052||20||435 000||396||900 540||>619|
EDR = economic demonstrated resources; SDR = sub-economic demonstrated resources; tcf = trillion cubic feet.
Note: Conventional gas demonstrated resources as of January 2011; CSG demonstrated resources as of January 2012. CSG probable reserves and contingent resources are used as proxies for EDR and SDR, respectively.
Source: RET, GA & BREE (2012).
Australian gas production is expected to almost triple to 2020 and to grow at an average of 5.5% a year to 2034–35 as reserves in north-western Australia are developed and CSG production in eastern Australia comes on line (BREE 2011c). This growth will be driven largely by LNG exports.
Further details on Australia's gas markets are in Chapter 9: Energy markets: gas.
Australian oil production is expected to decline over the period beyond 2020 in the absence of major new discoveries. As is the case with offshore gas, new finds in the established producing basins are more likely to be in deep water, smaller and higher cost. In the medium term, sustained high oil prices and new production technologies may enable the development of smaller fields that were previously not commercially viable.
Australia remains relatively unexplored for oil, and there is potential for significant new oil resources to be found in deepwater frontier basins (such as in the Great Australian Bight). We also have large undeveloped oil shale resources that require significant processing to release liquid hydrocarbons (GA-ABARE 2010). The development of onshore shale gas may also unlock unconventional liquid hydrocarbons.
Issues relating to Australia's liquid fuel markets, including the development of alternative fuels, are discussed further in Chapter 8: Energy markets: liquid fuels.
Australia is fortunate to have high-quality and widely distributed wind, solar, geothermal, hydro-electricity, ocean energy and bioenergy resources with enormous commercial potential. With the exception of hydro-electricity, for which the available resource is largely developed, and wind energy, which is growing rapidly, our renewable energy resources are mostly underdeveloped.
However, various commercial, technological and development challenges must be overcome before the potential is realised—most of which will be addressed by the private sector. Government support for renewable energy development and policy challenges are discussed further in Chapter 6: Clean energy.