Canberra looks to light a fire under energy investment

Uranium and natural gas are moving up the agenda, writes Nigel Wilson
NIGEL
July 19, 2006
CHANGES to the petroleum resource rent tax regime and measures to stimulate investment in small oil and gas exploration companies are likely to be revisited after the federal Government's renewed commitment to Australia's energy challenges.
The restatement by John Howard in his speech this week to the Committee for the Economic Development of Australia that the country could, and should, supply the domestic and world economies with low-cost energy has to be seen against the background of past policy decisions as well as the expectation of new ones.
In the next six months there will be a surge in offshore drilling activity as tax changes announced two years ago to stimulate exploration in frontier areas kick in.
There will be announcements soon concerning projects under the low emissions technology fund, while Resources Minister Ian Macfarlane later this week announces government grants of over $10 million to renewable energy projects nationally.
Where the Prime Minister's CEDA speech covered new ground was in flagging that Australia will speed up the development of new uranium mines (presumably in the Northern Territory) and a hint the Government is considering seriously expanding the role of natural gas in the overall energy mix.
"Our gas reserves are particularly important given the adaptability of this fuel in stationary energy markets and as a potential alternative to petroleum in transport applications," Mr Howard said. "Similarly, our deposits of coal, both black and brown, offer great potential for conversion to transport fuels such as diesel and hydrogen."
Earlier this year, Mr Macfarlane backed an initiative of the Australian Petroleum Production and Exploration Association (APPEA) aimed at having natural gas fuel 70 per cent of Australia's future electrical generation capacity.
But the Government has not previously looked seriously at gas-to-liquids as a substitute for imports of petroleum products and, despite a brief flurry two years ago, has not been seen recently as a big promoter of hydrogen.
Mr Howard outlined three core strategies for broad consideration:
* Building Australia's energy advantage based on proven strengths.
* Not putting all our eggs in one basket.
* Investing in leading edge, clean energy technology while being pragmatic about what technologies could help in reaching goals.
On uranium, Mr Howard pointed out that in energy terms it was already Australia's second-largest energy export in terms of energy content, playing a main role in decreasing the greenhouse intensity of other nations.
He said the report of the task force into nuclear issues, headed by Ziggy Switkowski, "will test the capacity of this country to maturely examine issues related to our long-term energy future and how this intersects with the need to control greenhouse gas emissions". "If Australia does not engage (in the global nuclear debate), if we sacrifice rational discussion on the altar of anti-nuclear theology and political opportunism, we will pay a price," Mr Howard warned.
Without spelling it out the Government is working against the knowledge that Australia's uranium export industry can expand in the short term - say within five years - only if the federal Government approves new mines in the Northern Territory.
Federal government officials conceded yesterday that if Australia was to make good on a policy of supplying uranium to countries such as China and India it would not want to become bogged down in a legal challenge from state Labor governments.
Mr Macfarlane says that although energy issues are only just surfacing in the public conscience they were etched in the Government's agenda at least two years ago. "Energy issues are just making their way from the business pages to front sections of newspapers but the federal Government actually heralded its focus on these matters with the White Paper of 2004 and we are now seeing the investment, public and private, flowing from those initiatives," he said.
Mr Macfarlane, who has recently taken up the baton for biofuels, says the public may need to broaden perceptions of what energy is to fully appreciate the unique position in which Australia finds itself.
"Sure our coal, gas and resource exports are likely to underpin national economic growth for years to come yet, but we also now have the perfect moment in time to build a strong, competitive secondary energy industry," he said. "Serious solar, wind, geo-thermal, hydro, renewable fuel and even hydrogen advances are within our reach and there's no reason we can't aim to become exporters of these energies also."
Mr Macfarlane says the energy jigsaw had a lot more pieces to it than 10 or even five years ago, some which were taking off quicker than others.
"Diversity will be central to our energy security but also to our ability to continue powering other countries who haven't got the natural abundancies or perhaps the technological drive that Australia has in spades."
Domestic gas is also high on the federal agenda, with Mr Macfarlane today bouncing ideas - including the development of a short-term trading market to significantly grow Australian use of natural gas - off the convention of the Australian Pipeline Industry Association in Brisbane. APPEA, the oil and gas industry's peak lobby group, says Mr Howard's speech is a line in the sand for the future. Executive director Belinda Robinson says that by acknowledging the critical importance of Australia's oil and gas, Mr Howard opened the way for reform in a number of key areas.
"In keeping with Mr Howard's energy aspirations to stimulate greater exploration, particularly offshore, the increased use of gas for electricity domestically and maximising the supply of LNG to the rest of the world, the industry wants to work closely with government," she said. Specifically, APPEA will be pushing to reform the licensing of high-risk, high-cost exploration; for changes to the tax regime, particularly as it applies to gas projects; for continuing funding for Geoscience Australia's pre-competitive information program; and for reducing impediments to increasing the use of gas in power generation.