By Australian Petroleum Production & Exploration Association (APPEA) chief executive officer Andrew McConville.
The oil and gas sector has helped underpin some golden years for the Australian economy. Its ability to continue to do so hinges on a stable investment climate we cannot take for granted.
Since the modern oil and gas industry was established in the 1960s in central Australia, Bass Strait and offshore Western Australia, it has expanded into areas such as central Queensland and the Northern Territory. Over the decades, our industry has contributed to our national economic growth, and we are delivering about 2 per cent of Australia’s GDP.
Over the past decade unprecedented investment has created thousands of jobs, invested billions of dollars in regional communities and bolstered the budgets of state and federal governments.
Eight of the country’s 10 gas export projects have been delivered since Western Australia’s Pluto development came on-line in 2012. Those projects, part of the industry investment in Australia over the past decade of more than $350bn, have made us the world’s leading LNG exporter.
However, while these projects in WA, Queensland and the NT have been developed, no new investment LNG projects have been approved in that time and we risk losing investments.
The industry could play a long-term role in helping the Australian economy lift out of the sharp slump wrought upon the nation by the pandemic.
A report commissioned by APPEA from international energy consultants Wood Mackenzie shows Australia has an opportunity to secure the next wave of investment, with the potential to deliver upwards of $50bn in capital expenditure, and secure up to 6300 jobs across the life of the projects and generate an estimated $80bn in taxation receipts.
But to achieve that we need to focus on maintaining a climate that encourages and enables long-term investments. That is under threat on several fronts. Increasing red and green tape is making the already high cost of doing business in Australia prohibitive. Voices seeming to believe we can tax our way to prosperity are growing louder. And a lack of awareness that we compete for capital with countries more supportive of investment means Australian projects just might not make the cut.
The Wood Mackenzie report identifies that since 2000 Australia has had 60 significant legislative changes, inquiries and reviews impacting the oil and gas industry — 41 of them in the past nine years.
Much of this activity has resulted from a deliberate campaign by activists and their political allies to delay and disrupt an industry that has operated without significant environmental impact for more than 50 years, while engaging in predominantly constructive, collaborative and mutually beneficial relationships with landholders and other users of the marine environment.
Just last week the CSIRO concluded that hydraulically fracturing (a long-established technique to enable more gas to be produced from fewer wells, colloquially known as “fracking”) was being conducted in Queensland with little or no impact on air, water or soil. Industry opponents responded by attacking the CSIRO.
This is not the time for closed minds.
We live in a competitive world; no one owes us favours. To maintain our standard of living our economy needs robust industry, supported by investors — never more so than as we strive to lift out of this all but certain COVID-induced recession. That applies to all industries, but the oil and gas sector is additionally constrained by 20-year lows in oil prices. That’s a challenge we can’t change, so we need to focus on things we can.
Against the backdrop of a challenging macroeconomic environment and lower commodity prices, Australian fiscal and regulatory volatility has increased at a time when continued stability is essential to remaining competitive.
Major oil and gas companies and their investors, supported by all credible energy analysts, know that the world’s energy mix is changing — and that we will use significant volumes of oil and gas for decades to come.
Those companies face choices on where to invest.
Capital discipline has become a focus for many companies and this may be problematic for Australia as there is simply less capital for deployment and its allocation is competitive, making higher cost jurisdictions like Australia less attractive.
Competitive pressures will continue to mount on Australia due to the potential of cheaper and more flexible projects in countries such the US, Russia, Mozambique, Nigeria, Canada and Mauritania/Senegal.
Australia’s investment environment has seen significant instability and looking ahead for investment to be attracted to Australia, the growing perception of instability and regulatory intervention needs to be reversed.
While focused on the oil and gas industry, the findings of the Wood Mac report also show that regulatory instability, intervention and uncertainty, coupled with Australia being considered to be a high-cost destination for business, has reduced the investment appetite and this may also be relevant for many other industries.
A lack of investment will have economic flow-on effects to communities and businesses we work with, making it counter-productive to the economic recovery phase this country will need to embark on.
Now is not the time to mess with the success our oil and gas industry has shared with the nation.