Australian Gas Resource

Transcription

1 Australian Gas Resource Regulatory and Fiscal Reform Dr Prafula Pearce - Curtin University, Perth

2 Introductory Comments on Australia s Gas Resource Australia has a decision to make do we take more control of our own future, by enabling the growth of a cheaper, cleaner, secure Australian energy source that supports jobs, boosts our economy and leads to a cleaner and healthier environment for our children? OR Do we bumble along with our current energy mix, watching our dependency on foreign imports continue to escalate, our cost of transportation, electricity and goods rise, and Australian jobs sent overseas with Australia losing power over its own destiny? Gas Energy Australia (2015), Cleaner, Cheaper Australian Fuels A 2030 Vision for Natural Gas Fuels CNG and LNG, New South Wales, p.1.

3 Extracted from: Australian Government Department of Industry and Science (2015), Energy White Paper 2015, p. 20.

4 Extracted From Australia s Unconventional Energy Options 2012 Sept 2012 Committee for Economic Development of Australia

5 Source: Australian Broadcasting Corporation News (2012), Coal Seam Gas By the Numbers, accessed 23 August 2015.

6 Source: Bureau of Resources and Energy Economics (2013), Eastern Australian Gas Market Study, p12.

7 Extracted from: Australian Government Department of Industry, Geoscience Australia and Bureau of Resources and Energy Economics (2012), Australian Energy Resource Assessment, p.4.

8 The Australian Government s Regulatory Regime COAG THE ENERGY COUNCIL AER AEMC AEMO BEING REVIEWED IN 2015

9 The Energy Council s Vision The Council s vision is for the establishment of a liquid wholesale gas market that provides market signals for investment and supply, where responses to those signals are facilitated by a supportive investment and regulatory environment, where trade is focused at a point that best serves the needs of participants, where an efficient reference price is established, and producers, consumers and trading markets are connected to infrastructure that enables participants the opportunity to readily trade between locations and arbitrage trading opportunities. Source: COAG Energy Council (2014), Australian Gas Market Vision Council-Australian-Gas-Market-Vision-Dec-2014-FINAL1.pdf, accessed 23 August 2015.

10 Market driven focus and not the preservation of gas resource not pursue national reservation policies or national interest tests. Source: See COAG Energy Council (2014) Meeting Communiqué (11 December 2014), and GOAG Energy Council, Gas Market Development Plan (Summary as at July 2015)....the Australian Government does not support calls for a national gas reservation policy or other forms of subsidy to effectively maintain separation between domestic and international gas markets or to quarantine gas for domestic supply. Source: Australian Government Department of Resources, Energy and Tourism, Energy White Paper 2012, p. 134.

11 Case against Domestic Gas Reservation (DGR) Australian Government through Energy White Paper Foreign Direct Investment; jobs; tax income APPEA study conducted by Deloitte Access Economics: Opportunity to generate $53b in export earnings; DGR distorts economic decisions; DGR will cost $6b in forgone GDP at 2025; DGR provides a subsidy to domestic users.

12 Case for DGR Study commissioned by industry users tight domestic gas supply will cost $255m in lost output for a 12m gain in export output; Net GDP cost of unrestricted LNG exports to be $22b in Revenue collection from royalties is not that significant between 5-7% of wellhead value. PRRT only forms 4.4% of total Commonwealth revenue in and set to decline over the next 4 years.

13 Case for DGR cont.. Is improvement in GDP the right measure for giving up a non-renewable resource of gas? Precautionary and sustainability principles require that the need of current generations should be satisfied without compromising the needs of future generations. Environment Protection and Biodiversity Conservation Act 1999 (Cth) to integrate both long term and short-term economic, environmental, social and equitable considerations in its decision of whether or not to preserve the natural gas resource.

14 Extracted From Australia s Unconventional Energy Options 2012 Sept 2012 Committee for Economic Development of Australia

15 Environmental considerations Source: Australian Broadcasting Corporation News (2012), Coal Seam Gas By the Numbers, accessed 23 August 2015.

16 Water usage Source: Australian Broadcasting Corporation News (2012), Coal Seam Gas By the Numbers, accessed 23 August 2015.

17 CO2-e Emissions from Production Source: Australian Broadcasting Corporation News (2012), Coal Seam Gas By the Numbers, accessed 23 August 2015.

18 Long term impact disposal of toxics Source: Australian Broadcasting Corporation News (2012), Coal Seam Gas By the Numbers, accessed 23 August 2015.

19 Need to preserve gas for Australia s transportation sector Australian Government Department of Industry and Science (2015), Energy White Paper 2015, p. 25.

20 Need to preserve gas for Australia s transportation sector Australian transport sector is dependant on foreign imported oil. There is a need to improve transport energy security. Importing at more than twice the price of exporting. Crude oil - $20.30 per GJ; Refined fuel imports - $26.80 per GJ; Export price of LNG - $10.57 per GJ. Gas should be encouraged for freight transport. In the year 2012, approximately 191 billion tonne-km of freight was moved, of which 75 per cent was transported by 87,000 trucks that consumed 4.3 billion tonnes of diesel.

21 Advantages of promoting gas for Australia s transportation needs A saving of Aus $870 million in import costs for every 10% substitution of imported diesel; Natural gas-powered heavy trucks emit 23 per cent less greenhouse gas emissions than diesel-powered trucks; Converting one diesel truck for a natural gas-powered truck can reduce 35 tonnes of CO 2 per annum which compares with removing 12 cars from the road; Compared with diesel, natural gas emits 30 per cent less Co 2, 75 per cent less nitrogen dioxide, 90 per cent less particulate matter and 99 per cent less sulphur oxide. Natural gas fuel has been recognised as having the lowest cost of production of any fuels in Australia out to 2050;

22 Fiscal Policy Incentives Use fiscal policies to bring about a shift from crude oil products to natural gas products for Australia s passenger and freight transport requirements. Currently gas vehicles have greater up front cost and greater running cost. Assist acquisition of natural gas fuelled trucks through increased accelerated depreciation rates. The average age of heavy duty vehicle for depreciation purpose is 13.7 yrs in Australia, compared with 7.8 yrs in UK, 4.9 yrs in Spain and 6.7 yrs in the USA. Diesel has preferable excise rates 59% less when compared with LNG and 64.5% less when compared with CNG. This discourages use of gas. Control gas exports and also reserve it for specific industries and users at specific prices by using Provider Gets Principle that has been adopted in the Emission Reduction Fund(ERF)

23 How ERF can be used to reserve gas Under the ERF, the Clean Energy Regulator accepts projects from entities that satisfies well defined criteria to reduce emissions and issue ACCU s. The entity can then sell the ACCU s at a reverse auction with the Government for a set price over a set period of time. A percentage of the gas extracted by gas developers could be legislated to be set aside in a Gas Reserve Bank controlled by a government body such as the AEMO. This government body could then auction the right to purchase gas at set domestic prices to domestic industries based on approved limits and approved criteria that satisfies the national interest test.

24 The Way Forward The benefit of exploiting the non-renewable natural resource of gas for an immediate return from export sales should be measured against other policies such as energy security, energy affordability, economic development and the long-term benefit of the nation. The Australian Government s free market policy on natural gas can jeopardise the promotion of these policies. Therefore, there is an urgent need for an independent government study to determine the best policy approach for Australia s gas endowment.

25 Concluding Comments This paper questions whether the Australian Government should use fiscal policy to direct the resource of gas to use it for Australia s current population needs without compromising the needs of the future generation, or should the non-renewable natural resource of gas be exploited for an immediate return from export sales without measuring the cost against other policies such as energy security, energy affordability, economic development and the long-term benefit of the nation.

26 Concluding Comments Natural gas is a fossil fuel that took millions of years for our planet to produce and it is worth questioning the type of country we will be leaving for our children and grandchildren if this resource is depleted within decades and in the process our children and grandchildren inherit polluted land and water.