South Australia:South Australia:Energy Poor, Energy Rich?

Graeme Bethune

gy , gy

Graeme BethuneChief Executive Officer, EnergyQuest

Hyatt Regency, Adelaide Friday, 31st March 2006

EnergyQuest

• Market analysis and d limodeling

• Strategic analysis of emerging issues

• Business development

• FinancingFinancing• Communication

The four E’s of energy

• E1: Economic growth• E2: Energy security• E3: Environment• E3: Environment• E4: Equity

Growing demand

• Millions of people b i lift d tare being lifted out

of poverty by growth i Chi d I diin China and India

High prices

• Now 124.9• LNG prices doubled• Coal prices up 2.5xp p• Uranium prices up

4x4x

Climate change concerns

Air Pollution in China. Source: World Bank.

Our land abounds in nature’s giftsgifts..

Abundant coal• Abundant coal• Abundant gas • Abundant uranium• Falling oil productiong p• Greenhouse

challengeschallenges

Energy rich

Source: Australian Government (2004), Securing Australia’s Energy Future

But how does SA rate?

• Fossil energy poor/uncompetitive• Peak oil: 1989• Peak gas: 1989• Peak gas: 1989• Importing power since early 1990s• End of oil refining 2003

Poor quality coal• Poor quality coal• Car industry based on traditional fuelsy

Cleaner energy but higher prices

Power generation mix (04/05)

Australia SAmix (04/05)

Coal 76% 36%

Oil 1% 6%

Gas 15% 51%Gas 15% 51%

Other 8% 7%

Retail prices (01/02)c/kWh

10.16 13.16c/kWh

Source: ABARE, ESIPC

Coal cheapest but dirtiest

250

260

270

Photovoltaic

100250

per

MW

hag

e co

st, $

per

Wind

BiomassIGCC + Geosequestration

BCIGCC + GeosequestrationSupercritical brown + Geosequestration

50ng r

un a

vera

g

NuclearGeothermal

BiomassIGCC + GeosequestrationSupercritical black + Geosequestration

30

50

Long

Subcritical brown coal

Subcritical black coal

Supercritical brown coal

Supercritical black coal

IGCC BCIGCC

Combined Cycle Gas Turbine

300 200 400 600 800 1000 1200

Emission intensity, t CO2-e/MWhEmission intensity, kg of CO2-e per MWh

Source: Allen Consulting

New entry generation i ith beconomics with carbon

80

100Gas

Brown Coal

Gas $10/t

40

60

$/M

Wh

Gas $10/t

Brown Coal $10/t

PEAK INTERMEDIATE BASELOAD

0

20

030% 40% 50% 60% 70% 80% 90% 100%

Load Factor

Source: Origin Energy assumptions with $3/GJ gas

Cooper gas declining…Cooper Basin Gas Production

300

250

300

150

200

PJ Cooper Basin Gas Production

50

100

0

50

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Distance less a tyrant

Source: ENA

East coast gas reservesSource 2P Reserves (PJ)

Eastern Queensland (3%) 400

Cooper (11%) 1,500

Gippsland (50%) 7,100

Otway/Other Gippsland (11%) 1 600Otway/Other Gippsland (11%) 1,600

CSM (25%) (Qld/NSW) 3,500

Total (100%) 14,100

CSM Potential 3,000+

PNG 7,000+

Gas prices

E t C t A t li i f th h t t idEast Coast Australian gas is some of the cheapest gas outside Russia, the Middle East, Argentina:

• US: US$7.39/mcf (A$10)LNG US$6 50/ f (A$8 85)• LNG: US$6.50/mcf (A$8.85)

• Europe: US$12.20-17.50 (A$16.50-23.75)• Ukraine: Russian attempt to lift from A$1.80 to A$8.50• PNG gas: A$3• Australian conventional gas: A$3.00-3.50• Victoria (Feb): A$2.48( ) $• Queensland CSM: A$2.00• WA prices increasing

Cooper Oil ProductionCooper Oil Production

25 0

20.0

25.0

15.0

00 b

bls/

d

Oil

5.0

10.0'00

-1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Uranium• Back on the agenda• Uranium price has increased 4x since 2003• Uranium price has increased 4x since 2003• 23 nuclear reactors under construction

globally 39 planned 98 proposedglobally, 39 planned, 98 proposed.• Two under construction and 8 planned in

China• Nuclear increasingly likely to play role in

energy portfolio• BHPBilliton take-over of WMC• ASX uranium float frenzy

Australia

• 37% of world’s low-cost uranium, worth about A$100 billionA$100 billion

• Smaller producer than Canada but twice Canada’s reservesCanada s reserves

• Record production in 2005 of 12.4 kt (A$573m)(A$573m)

• 2005 LNG exports A$3.7b, thermal coal A$6 9bA$6.9b

• 2005 net petroleum imports A$4.7b

Three Mines

Production Reserves

Olympic Dam 40% 86%y pSARanger 50% 9%RangerNT

50% 9%

BeverleySA

10% 5%

Source: UIC

Olympic Dam

• World’s largest uranium resource• 70 year mine life• A$5b expansion FEED• A$5b expansion FEED• Uranium production to increase from

4,500 tonnes pa to 15,000 tonnes• Target date: 2013• Target date: 2013

Political issues

• “I don’t believe as a Labor politician and I think I can safely• I don t believe as a Labor politician, and I think I can safely speak for the conservative side of politics, that the nation is ready to enter the debate about nuclear power. The push for energy supplies will come from renewable energy ” Kevin Foleyenergy supplies will come from renewable energy.” Kevin Foley (8 March)

Geothermal• Potential to provide geo

thermal energy forthermal energy for clean base load power generation

• Large potential renewable resource

• Commercially and• Commercially and technically possible but not proven

• Needs GHG policy to be competitive

Source: ANU

Progress

Source: Geodynamics

Geothermal potential

Source: Geodynamics

Wind• Growing source of energy

•Generation costs have fallen 50% in 15 years

•Growth generally driven by government programs

•SA wind capacity about 10% of supply capacity

•World leader in wind share

Solar

•Global sales of solar panels US$11b this yearpanels US$11b this year, up from $7b.

G i i t t b•Growing investment by major energy companies

•BP investments in solar, including manufacturing in Australia

Origin Energy solar PV manufacturing plant, Adelaide

in Australia

•Origin investment in SLIVER t h lSLIVER technology

Bio Fuels

• Ethanol (from sugar and starch) and biodiesel (from vegetable oil and animal fats)(from vegetable oil and animal fats)

• Benefit from import protection and an excise advantage but viable at oil prices> US$45/bbladvantage but viable at oil prices> US$45/bbl

• Have been slow in gaining acceptance, <1% of marketof market

• Recent labelling changesSAFF/A t li R bl F l• SAFF/Australian Renewable Fuels

• SA potential but Queensland first-mover

SA: energy poor/energy rich?• Historically fossil fuel poor and falling• But coal states and WA also face challenges• Can SA grasp opportunities to become cleaner energy rich?• Good access to cheap gas. How can we leverage to add value?• First-mover advantage in uranium but political barriers to addingFirst mover advantage in uranium but political barriers to adding

value• First-mover advantage in hot rocks but not proven • Early mover in biofuel a y o e b o ue• But only possibilities • Critical time for SA energy policy to position the state for new

energy worldgy

EnergyQuest

• Adelaide L10/ 60 Waymouth St Adelaide SA 5000• Melbourne L4/ 6 Riverside Quay Southbank Vic• Melbourne L4/ 6 Riverside Quay Southbank Vic

3006• Telephone 1300 658 966e ep o e 300 658 966• International +618 8431 7903• Mobile 0419 828 617• Fax +61 (0)8 8431 7903• Email service@energyquest.com.au

www.energyquest.com.au

South Australia:South Australia:Energy Poor, Energy Rich?

Graeme Bethune

gy , gy

Graeme BethuneChief Executive Officer, EnergyQuest

Hyatt Regency, Adelaide Friday, 31st March 2006

South Australia:South Australia:Energy Poor, Energy Rich?

Graeme Bethune

gy , gy

Graeme BethuneChief Executive Officer, EnergyQuest

Hyatt Regency, Adelaide Friday, 31st March 2006