Gas is the way ahead for nation - Business - Business - theage.com.au

OPINION

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AdvertisementIT IS a gross understatement to say that the world is grappling with the critical dilemma of rising world energy demand and security while cutting greenhouse gas emissions.

To date, in Australia that debate has centred largely on the impact of our heavy reliance on coal for electricity production in Australia and our growing exports of uranium for electricity production overseas. Other than the impact of rising petrol prices, much less has been said about Australia's energy security needs in the context of transport fuels. Yet Australia's reliance on imported oil and fuel is increasing.

Beyond the resource sector, the debate about the development of new industries producing clean transport fuels from our abundant gas reserves has been largely neglected.

It must be said that the outlook for LNG has never been better. But there is a market other than LNG that is being overlooked by Australia and captured by international competitors.

About 20 years ago Paul Keating, as resources minister, was a great advocate of technologies to convert gas and coal to liquids. GTL (gas-to-liquids) is a relatively environmentally friendly technology producing clean diesel from natural gas — diesel with virtually no sulphur and no aromatics.

The perception is that diesel is dirty and noisy but this technology produces a clean, low-emission fuel that Europe is rapidly adopting.

Unfortunately, the Howard Government has waxed and waned on a policy for gas-to-liquids technologies.

It is now about five years since Senator Nick Minchin, then minister for resources, appointed a taskforce to investigate the feasibility and benefits of establishing a GTL industry in Australia. The taskforce highlighted the potential significance of a GTL industry to Australia's economy, saying it could underwrite offshore gas supply infrastructure to bring forward the possibility of major new domestic gas pipelines to connect the national market, increase domestic gas competition and energise gas exploration. The taskforce said: "These benefits would be of national strategic significance to Australia."

Five years later no action has been taken.

The taskforce noted that while Australia could simply wait for the market to provide an incentive for a GTL industry, once gas supply infrastructure is in place and investment is sunk in other countries where taxation and infrastructure incentives are on offer today, those countries will serve as investment hubs for expansion for many years to come.

And that is exactly what is happening in Qatar.

Australia's competitors in the gas industry are way ahead of us. Qatar, already a formidable competitor for the Australian LNG industry, is developing GTL projects making clean transport fuels for the global market.

While the LNG industry has been and will continue to be immensely important to Australia's economic growth and export performance, the weight of evidence suggests we would be remiss not to create the right environment to at least keep the GTL option open for the Australian gas industry.

Government has always played a big part in energy resource development in Australia.

Twenty-two years ago, the North-West Shelf project was one of those developments.

It took a mighty partnership between governments — state and federal — and the private sector to get that project — still Australia's biggest ever — off the ground.

Do we regret that we married commerce and the national interest then?

Without the LNG industry we would all be the poorer.

Australia needs a new generation of nation-building industries and infrastructure.

And there is no better place to focus today than on our north-west oil and gas industry to both enhance our export base and secure Australia's future fuel security at a time when consumers are concerned about high petrol prices and increasing reliance on the Middle East.

That's why the right fiscal and regulatory environment is needed to make GTL an option in this country as well as LNG.

The Australian Bureau of Agricultural Resource Economics has forecast that a GTL project could replace more than half Australia's projected oil and fuel imports by around 2015. Given this, it seems inconceivable that it is not on the energy policy agenda.

Martin Ferguson is the shadow minister for primary industries, resources, forestry and tourism. This is an edited version of a speech he gives today to the Gas to Liquids conference in Perth.

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