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TRANSCRIPT
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Advancing Climate Action in
Queensland
Making the Transition to a Low
Carbon Future
Submission | September 2016
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Contents
Introduction ............................................................................................................................................... 3
The Queensland upstream oil and gas industry ................................................................................. 3
The key role natural gas plays in reducing global greenhouse gas emissions ............................. 4
Queensland’s natural gas: integral to a low carbon Queensland economy ......................... 4
Queensland’s natural gas: integral to low carbon economies in Asia ..................................... 5
International competitiveness: the major challenge ........................................................................ 5
Comments on Advancing Climate Action in Queensland: Making the Transition to a Low
Carbon Future ........................................................................................................................................... 6
International context ........................................................................................................................... 6
Subnational action .............................................................................................................................. 6
National action ..................................................................................................................................... 7
What are the opportunities? .............................................................................................................. 7
What Queensland is already doing ................................................................................................. 7
What more should Queensland be doing? .................................................................................... 8
Resources ............................................................................................................................................... 9
Conclusion/next steps ........................................................................................................................... 10
Attachment 1: APPEA Climate Change Policy Principles .............................................................. 11
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Introduction
Since 1959, the Australian Petroleum Production & Exploration Association (APPEA) has been
the peak national body representing the upstream oil and gas exploration and production
industry. APPEA has around 80 member companies that explore for and produce Australia’s
oil and gas. In addition, APPEA’s more than 200 associate member companies that provide
a wide range of goods and services to the industry. Further information about APPEA can
be found on our website, at www.appea.com.au.
APPEA has been engaged in the greenhouse policy debate since its inception and has
participated in every major consideration of national climate change policy approaches in
Australia.
APPEA welcomes the opportunity to provide comment on the Queensland Government
discussion paper Advancing Climate Action in Queensland, Making the transition to a low
carbon future (the discussion paper).
APPEA is committed to working with policymakers as they develop policy responses to
climate change. With that in mind, APPEA has recently released a second edition of its
Climate Change Policy Principles – a copy of which is at Attachment 11 – setting out the
principles that APPEA considers should underpin Australia’s response to climate change.
Most importantly, APPEA supports a national climate change policy that delivers
greenhouse gas emissions reductions at least cost and facilitates broad-based investment
decisions consistent with an international price on carbon.
In addition to the APPEA submission, a number of APPEA members have made individual
submissions to the discussion paper. This response should be read in conjunction with
submissions from individual APPEA members.
APPEA’s submission addresses specific aspects of the discussion paper, focussing on those
areas that are particularly important for the upstream oil and gas industry.
The Queensland upstream oil and gas industry
It is also important to place our views on the issues raised by the discussion paper within the
context of the current state and, very importantly in the context of the discussion paper, the
potential future contribution of the upstream oil and gas industry to the Queensland
economy and to the welfare of all Queenslanders.
Reliable, secure and competitively priced energy is crucial to our everyday lives in Australia,
including in Queensland. Within this framework, oil and gas plays a key role in meeting
many of our energy needs.
Queensland has vast resources. The Queensland Government has estimated2 that
Queensland’s gas reserves are around 44,000 (PJ). By way of comparison, Queensland’s
production of natural gas in 2014-15 (including exports) was 515 PJ, meaning Queensland
has more than enough gas to service both domestic and export markets for decades.
1 A copy of APPEA’s Climate Change Policy Principles can also be found at www.appea.com.au/2016/02/appea-
updates-climate-change-policy-principles. 2 See data.qld.gov.au/dataset/petroleum-gas-production-and-reserve-statistics for further information.
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Provided our regulatory and policy settings are supportive, our abundant natural gas
resources place Australia in an enviable position to maintain long-term, cleaner energy
security domestically and internationally. Natural gas makes it possible for Australia to meet
the world’s growing energy needs over the coming decades while incorporating a strategy
to curb emissions and address the risks posed by climate change.
Just as importantly, the industry creates significant wealth for the State, including through
the employment of many Queensland, underpinning the revenue collections of
governments and generating valuable export revenue for the Australian economy. For
example, in recent years, the industry has invested around $65 billion in oil and gas projects
in Queensland, including the three major liquefied natural gas (LNG) export projects, now
operating from Gladstone.
This means that the stakes are high in realising the industry’s potential benefits.
However, future investment is not certain. The challenging conditions facing the industry,
both globally and in Australia, mean it is more important than ever to ensure the policy and
regulatory framework facing the oil and gas industry in Australia remains competitive and
encourages further exploration and development activity.
The key role natural gas plays in reducing global greenhouse gas emissions
Greater use of Australian natural gas – in the domestic market nationally and in
Queensland, and in Asia as LNG exports – can significantly reduce greenhouse gas
emissions.
Queensland’s natural gas: integral to a low carbon Queensland economy
Queensland (and indeed all of Australia) could generate significant additional national
economic, environmental and social benefits through greater utilisation of its substantial
natural gas resources.
Using more natural gas in Queensland’s power generation (as part of the National Electricity
Market) and resource processing would significantly enhance our ability to meet increasing
energy needs while at the same time reducing greenhouse gas emissions.
These outcomes are possible because available natural gas power generation technologies
can reduce greenhouse gas emissions by 40-50 per cent, and by as much as 75 per cent in
some circumstances3, compared to coal-fired power generation technologies. The
Australian Council of Learned Academies has found using gas to provide more baseload
and peak electrical power generation in Australia – in scenarios of higher use of both
renewables and gas – would deliver substantial emissions reductions.
The increased use of natural gas also has several additional environmental benefits, such as:
Reduced emissions of fine particulates.
3 See Australian Council of Learned Academies (2013), Engineering Energy: Unconventional Gas Production, June
(available at www.acola.org.au/index.php/projects/securing-australia-s-future/project-6). While the emissions
benefit is lower when compared to ultra-supercritical coal-fired power generation, as the Council noted on
page 146 “gas-fired electricity generation will generally replace existing coal-fired boilers that are less efficient
subcritical facilities”.
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Reduced emissions of sulphur dioxide (an important contributor to smog and acid rain)
and nitrogen oxides.
Significantly lower demand for water for power station cooling.
Much greater use of Queensland’s extensive gas resources will be crucial in meeting the
challenge of significantly reducing global greenhouse gas emissions at least cost whilst
enhancing economic and export performance.
This means the investment framework in Queensland must recognise the economic and
environmental benefits that will flow from investment in Queensland’s extensive gas
resources.
Queensland’s natural gas: integral to low carbon economies in Asia
In considering climate change policy responses and Australia’s, including Queensland’s,
current and future contribution to global emissions reduction efforts, it is important to
acknowledge the positive contribution LNG exports make now and will increasingly make to
that global effort.
Queensland’s LNG industry, as a key part of the broader Australian LNG industry, is in a
unique position to contribute substantially to the economic development of the nation and
to reduce greenhouse gas emissions.
Queensland’s vast resources of natural gas and proximity to growing markets make us
well-placed to meet the global climate change challenge while substantially contributing
to economic growth.
While the demand for energy as part of the industrialisation of Asian economies is a key
driver, the cleaner properties of natural gas as a lower emitting and cleaner burning fuel is
also driving much of the international demand for LNG.
As noted above, future investment is not certain. The challenging conditions facing the
industry, both globally and in Queensland, mean it is more important than ever to ensure
the policy and regulatory framework facing the oil and gas industry in Queensland remains
competitive and encourages further exploration and development activity.
In addition, burning gas instead of coal improves urban air quality. This is particularly
important in many Asian countries that are importing LNG or considering imports.
There are significant benefits to Queensland and internationally from the greater use of gas
as a lower greenhouse gas emitting energy source.
Much greater use of our extensive gas resources will be crucial in meeting the challenge of
significantly reducing global greenhouse gas emissions at lowest possible cost whilst
enhancing economic and export performance.
The Queensland Government should, in finalising its Action Plan, recognise the vital role
Queensland LNG exports can play in global greenhouse emissions reductions.
International competitiveness: the major challenge
The major challenge to the industry’s continued growth is maintaining Queensland’s (and
Australia’s) international competitiveness in the face of growing global competition. A
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relatively high-cost local environment, falling oil and gas prices, and the emergence of new
LNG competitors in East Africa, North America and other locations may increase the level of
competition Australia faces, as its seeks to win market share and attract investment.
The industry and our governments must do everything possible to ensure, that Queensland
secures future oil and gas investment to supply to domestic and international needs. In this
respect, it is important to note that no new LNG investments have been announced in
Australia in more than four years.
Some factors affecting current and future investment, such as movements in the Australian
dollar or oil prices, are beyond the ability of the industry to influence. However, other key
challenges must be addressed.
There are also critical policy areas that require genuine reform. Our approach to climate
change policy is one of those critical areas. That policy should be aimed at enhancing
Australia’s international competitiveness as a destination for oil and gas investments. It
should not add to the cost burden facing the industry or detract from Queensland’s
attractiveness as an investment destination.
Comments on Advancing Climate Action in Queensland: Making the Transition to a Low
Carbon Future
With that in mind, APPEA offers the following comments on specific sections of the discussion
paper.
International context
APPEA notes the Australian Government has committed to an emissions reduction target of
26-28 per cent on 2005 levels by 20304. This target forms part of the Australia’s national
determined contribution taken to the Paris Climate Change Conference.
APPEA’s submission to the UNFCCC Task Force that advised the Australian Government on
an emissions reduction target noted5:
In setting Australia’s emission reduction goals, the key consideration is that Australia
should make an equitable contribution, in accordance with its differentiated
responsibilities and respective capability to global action, to reduce greenhouse gas
emissions.
Subnational action
As was considered earlier in this submission, APPEA’s Climate Change Policy Principles note
APPEA supports a national climate change policy that delivers greenhouse gas emissions
reductions at least cost and facilitates broad-based investment decisions consistent with an
international price on carbon.
This means APPEA’s considers the majority of climate change policy responses, particularly
those focus on mitigation, should be developed and implemented at a national level and
should be not be duplicated through subnational action. Such action can be both costly
and inconsistent with a national approach.
4 See www.environment.gov.au/climate-change/australias-emissions-reduction-target for further information. 5 See www.appea.com.au/wp-content/uploads/2015/04/APPEA-Submission-Post-2020-GReenhouse-Targets-
240415.pdf for further information.
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Where subnational action may be appropriate is in adaptation and in this context APPEA
notes Queensland has an adaptation focus through the Queensland Climate Adaptation
Strategy (Q-CAS) and supports this as an appropriate area of action for the Queensland
Government.
National action
As the discussion paper notes on page 9, the Australia now has an emissions reduction
target of a 26-28 per cent reduction on 2005 levels by 2030. As the paper also notes, the
Australian Government has a range of climate change policies in place to meet these
targets, including the Emissions Reduction Fund (ERF) and its safeguard mechanism.
Importantly, in this context, the Australian Government is due to commence a review of the
its climate change policy response by 30 June 2017 and to complete that review by
15 November 2017. This review will provide all stakeholders, including the Queensland
Government, the opportunity to makes it views on the national context and the appropriate
national response known.
What are the opportunities?
The discussion paper on page 18 considers the opportunities for Queensland presented by
the transition to a clean energy, low carbon economy.
As was noted earlier in this submission, the Queensland natural gas industry, both within the
Queensland economy and as a key and growing export industry, has a key role to play in
this transition.
To support this outcome, the Advancing Climate Action in Queensland should recognise
that there are significant benefits to Queensland and internationally from the greater use of
gas as a lower greenhouse gas emitting energy source. Much greater use of our extensive
gas resources will be crucial in meeting the challenge of significantly reducing global
greenhouse gas emissions at lowest possible cost whilst enhancing economic and export
performance. The Queensland Government should, in finalising its Action Plan, recognise
the vital role Queensland LNG exports can play in global greenhouse emissions reductions.
What Queensland is already doing
APPEA notes that through the Renewable Energy Expert Panel, the Queensland
Government is assessing and establishing a pathway to a 50 per cent renewable energy
target by 2030.
APPEA supports a market-based approach to emissions reductions and also to the
operation of the national energy market, of which Queensland is a part. APPEA therefore
does not support establishing a specific target for the level of generation that comes from
any particular form of technology.
APPEA also notes the key role natural gas would play in complementing renewable energy
generation, to provide reliable baseload energy to support the intermittent nature of
renewable energy generation. As has been seen in Tasmania and South Australia in recent
months, a thoughtful and pragmatic approach to energy market design and operation, to
integrate more and more renewables into the grid.
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A recent paper6 by the US-based Syracuse University and renowned National Bureau of
Economic Research, conducted jointly with researchers from the Fondazione Eni Enrico
Mattei and Euro Mediterranean Centre on Climate Change in Italy and French Economic
Observatory Sciences Po and SKEMA Business School in France, Bridging the Gap: Do Fast
Reacting Fossil Technologies Facilitate Renewable Energy Diffusion?, discusses the role of
fast-reacting fossil technologies, which includes most gas generation technologies, in
supporting renewable energy investments.
It does so by studying the deployment of these two technologies in 26 OECD countries,
including Australia, between 1990 and 2013. The paper finds that a 1 per cent percent
increase in the share of technologies such as gas fired generation capacity is associated
with a 0.88 per cent percent increase in renewable in the long-run.
The paper makes a number of very important conclusions based on its detailed empirical
research across the 26 countries, three of which stand out as directly relevant to the
Queensland Government’s climate action plan:
• Countries where gas-fired generation capacity was available were more likely to
invest in renewable energy generation particularly over the longer-term.
• Gas-fired generation is characterised by quick ramp-up times and lower capital
costs than traditional baseload technologies. This means gas-fired generation
technologies have enabled renewable investments by providing reliable back-up
capacity to support variable renewable energy supply.
• Renewables and fast-reacting gas-fired power general technologies appear as
highly complementary and they should be jointly installed to meet the goals of
cutting emissions and ensuring a stable supply.
This mean that as the penetration of renewable energy increases, so will the requirements
for increased back-up capacity and serious stresses will be put on the energy system unless
the relationship and the complementarity between gas-fired power generation and
renewable energy technologies are appropriately acknowledged.
Policymakers, including in Queensland, should accept that, for the foreseeable future,
Australia needs a mix of generation technologies. Policymakers should also recognise that
technologies complement as well as compete with each other. Gas-fired plant is ideal for
responding rapidly to spikes in demand or sudden falls in renewable output7.
What more should Queensland be doing?
As was considered earlier in this submission, APPEA supports a national climate change
policy that delivers greenhouse gas emissions reductions at least cost and facilitates broad-
based investment decisions consistent with an international price on carbon.
This means APPEA’s considers the majority of climate change policy responses, particularly
those focus on mitigation, should be developed and implemented at a national level and
should be not be duplicated through subnational action. Such action can be both costly
and inconsistent with a national approach.
Where subnational action may be appropriate is in adaptation and in this context APPEA
notes Queensland has an adaptation focus through the Queensland Climate Adaptation
6 Available at www.feem.it/getpage.aspx?id=8600&sez=Publications&padre=73. 7 For more on this issue, please see www.appea.com.au/2016/07/close-the-generation-gap.
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Strategy (Q-CAS) and supports this as an appropriate area of action for the Queensland
Government.
In addition, as was noted above, Queensland’s natural gas industry provides a key
opportunity for both economic growth and greenhouse gas emissions reductions, both
within Queensland and within the region.
Supporting the growth and development of Queensland’s natural gas industry is one of the
strongest contributions Queensland can make to positive climate action.
Resources
The oil and gas industry measures and reports its greenhouse gas emissions from all stages of
exploration and development under the National Greenhouse and Energy Reporting
Act 20078.
In addition, the ERF’s safeguard mechanism covers the vast majority of the industry’s
facilities, placing an obligation on those facilities to keep their emission below a set
baseline9.
The industry can also bid emissions reduction opportunities into the ERF auctions, including
through a specific method developed to encourage projects that reduce fugitive emissions
from venting at oil and natural gas extraction, production, transport and processing
facilities10.
In addition to any obligations or incentives provided through climate policies, the industry
has a very strong and direct incentive to operate its facilities as efficiently as possible,
including in ways that minimise any fugitive emissions.
There has historically been a relative misunderstanding and under-appreciation by many of
the existing and powerful drivers for energy efficiency that pervade the operations of the
upstream oil and gas industry in Australia and the industry’s history of reducing the energy
intensity of its operations and increasing its energy production efficiency. This includes in
minimising any possibility for fugitive emissions during the exploration and development
process. This is because any natural gas that is lost through fugitive emissions is gas that
cannot be processes and sold to customers.
This means fugitive emissions have a very direct opportunity cost associated with them –
every unit of gas that can be saved through reducing fugitive emissions is a unit of gas that
can be sold.
This driver, that pervades the initial design and ongoing operation of these facilities exists
independent of a carbon policy response and drives energy efficiency and fugitive
emission reduction actions throughout the facility.
8 See www.environment.gov.au/climate-change/greenhouse-gas-measurement for more information. 9 See www.environment.gov.au/climate-change/emissions-reduction-fund/about/safeguard-mechanism and
www.cleanenergyregulator.gov.au/NGER/The-safeguard-mechanism for more information. 10 See www.environment.gov.au/climate-change/emissions-reduction-fund/methods/oil-gas-fugitives for more
information.
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Conclusion/next steps
Our abundant natural gas resources place Australia in an enviable position to maintain
long-term, cleaner energy security domestically and internationally. Natural gas makes it
possible for Australia to meet the world’s growing energy needs over the coming decades
while incorporating a strategy to curb emissions and address the risks posed by climate
change.
APPEA will continue to participate in the development of the Queensland Government
response and looks forward to ongoing consultation and to working constructively with the
Queensland Government as aspects of the Queensland response are further developed.
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Attachment 1: APPEA Climate Change Policy Principles
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