We asked Mr Ferguson what he thinks the future has in store for the gas transmission sector in Australia, and he replied, “I think the gas industry has got an attractive future – especially flying from the development of the emissions trading sector – because a lot of it is seen as a transition source of energy and attractive from the point of view of a lower carbon intensity in terms of the use domestically and internationally.”

He said that although there has been some concern from the gas industry over what the National Gas Law and Bulletin Board will mean for the short-term trading market, he emphasised “There’s going to be full and proper consultation. We’re going to get on with the job of attracting investment to Australia and there are a lot of projects currently under consideration, such as where we go on the expansion of the Dampier to Bunbury pipeline.

“So I actually think we need to confront ourselves about our national energy system and the gas sector should not be worried about these developments, because I also simply guarantee that our transparency in competition is not about creating unnecessary regulation being a barrier to investment, it’s actually about bringing certainty, transparency and reinforcing that investment opportunities exist in Australia.”

Regarding the effect the Australian Energy Market Operator and the National Gas Law will have on industry, Mr Ferguson said that the National Gas Law represents the outcome of consultation with the gas operators and state and territory governments.

He said that a Bulletin Board will be about creating a framework so that people have a better understanding of the national market. “They’ve got agreed common operational rules across jurisdictions, and that should be good for investment,” said Mr Ferguson. “One of the key things in investment is that investors want to know the ground rules. They don’t want uncertainty, they want to know if you’re establishing this gas market as part of the national energy market, where are they going to be?

“On these short-term trading markets, we have said that we will continue to consult, because that’s also about saying to the gas sector there aren’t going to be any hidden agendas, it’s all going to be put in place and you can work with some certainty. This is all about the increased use of gas for electricity generation in Australia which is what the community wants.”

The regulatory situation for gas transmission, he said, “is a moving feast at the moment…The National Gas Law will hopefully be finalised through the South Australian Parliament in the foreseeable future. The Bulletin Board has been subject to discussion last December, and I think it’s now recognised that hopefully it’ll be helpful in operating in the gas industry, because it creates common operational rules.

“There was some hesitancy, especially from the pipeline operators, but they now know they’ve got a seat at the table in terms of consultation about the finalisation of, for example, the short-term trading market…there could be some adjustments on the way through about that.”

Mr Ferguson said that the possibility of West Australian transmission pipelines coming under the jurisdiction of the AER “is not on the short-term agenda in terms of the desires of the West Australian Government at the moment. But at some point in the future it will hopefully develop.

“I think one of the key issues in Western Australia at the moment is not so much whether it actually fits into the national energy market, but what assistance the Australian Government can give to actually guarantee domestic gas, which is so important to the future of industry and downstream prices in Western Australia, plus ordinary households.”

Regulatory goalposts, according to Mr Ferguson, are about encouraging investment in Australia. “They’re about clearly sending a message that we don’t want to see any monopoly market power, but trying to make sure that the system is about commercial outcomes,” he said.

“Governments don’t make investment decisions, we create the regulatory environment which says to industry there’s some certainty, you know the rules, there are opportunities in Australia, you’ve got to grasp the market opportunities.”

On recent developments in Australia’s petroleum sector

When asked which projects and recent developments in Australia’s petroleum sector he sees as being particularly exciting, Mr Ferguson said, “I think we’re pretty lucky at the moment, we’ve got a lot of international interest in our petroleum sector and obviously in terms of LNG we have exciting export opportunities.

“In recent years, we’ve had new supply agreements for places such as China and Taiwan, we’ve got our old traditional markets such as Japan and Korea which have been very important to us.

“I recently visited the Pilbara and had a chance to look at the existing operation there, where we’re just about to finish the fifth gas train. And I’ve also had an opportunity to go down and have a look at the Pluto site, where we’ve got construction now to put two further gas trains in place. Hopefully we’ll start production from them in another three years’ time. So onshore, we’ve got terrific investment infrastructure, and I think the just the Pluto investment alone is something in the order of $12 billion which is a statement internationally on how important Australia is for the development of the industry.”

Mr Ferguson said that he thinks a lot of nations look at Australia with envy, due to our strong resources sector. “We’re very lucky and we’re extremely rich in energy resources. We’ve got to not only be committed to exports and new exploration opportunities, but also make sure we guarantee Australia’s energy security,” he said.

However, he also said that Australians have got to understand that primary energy consumption in Australia will increase an average annual rate of 1.6 per cent between now and 2029/30.

“So, our energy future looks good both on the export and domestic front but requires government leadership working with individual companies and peak organisations…to make sure we get a framework in place which guarantees investment in Australia so that our resources are not left stranded,” he said.

On emissions trading schemes and renewable energy

The question of an emissions trading scheme was, Mr Ferguson acknowledges, a key issue in the lead up to the recent election. “One of the government’s first acts was to make sure we put in place a ratification of Kyoto, but post-Kyoto obviously the Minister for Climate Change, Penny Wong, has got to work not only with myself but also with the private sector and the state and territory governments, to put in place our ambitious emissions trading scheme by 2010,” he said.

“Along the way there’s going to be a lot of consultation with industry, and that effectively means a price on carbon in terms of greenhouse gas emissions…In the petroleum sector, while the details of the emissions trading scheme have not been finalised, for lower carbon intensive energy resources such as gas, renewables and clean coal, then such a system could be quite attractive, provided we get the balancing right in developing the system and we’ll also continue to invest for example in clean coal technology which guarantees our future.”

Asked about the balance between a state-based scheme and a federal scheme, Mr Ferguson said, “I think that what one of the objectives is, in going down this path, to bring all the efforts of the state and territory governments, via COAG, into a common national outcome. That’s what the private sector expects, I think that’s what they desire of state and territory governments. Because if we’re going to make progress on this front, we’ve got to make sure that we’ve got a nationally consistent set of climate change measures, because that guarantees cooperation.”

“Gas”, Mr Ferguson said, “is correctly perceived as part of a clean energy future and it has massive potential to Australia domestically and internationally, for local domestic energy purposes and for the purposes of export opportunities.

“I think the gas sector is a key part of our future, it’s part of it as a transition fuel which locks in energy security for Australia, hopefully, but also secures additional export opportunities. We’ve got a dual objective, to create the framework for export opportunities but also along the way guaranteeing the security of our own energy supply in Australia.”

Carbon capture technologies and geosequestration have been much talked about in recent times, and Mr Ferguson said that they are core work for the Australian Government. “We are very much a fossil fuel-dependent nation, and there’s clearly going to be a growth in the renewable sector and the use of gas but we also appreciate that we have go to get clean coal technology right and the way it’s going we might be one of the first nations to actually put in place and pilot a CO2, carbon sequestration legislation for offshore acreage in Australia.

“It’s actually very exciting, we’ll not only be giving support to clean coal opportunities through the Clean Coal Fund, but part of that means we go on with the national carbon mapping and infrastructure plan, so that people know where the opportunities are for CO2 sequestration in Australia.”

Obviously, there will be a lot of infrastructure involved with developing that, which, Mr Ferguson said, means more jobs for Australia. “It’s a new industry. We’ve got to pursue these pilot technological developments because they’re of tremendous significance to Australia but also tremendous significance for the whole world…There’s a lot of interest internationally in what we’re doing. A lot of the private sector companies have got investments not just in Australia but in other key countries around the world, and they want to work with the new government to try and make real progress sooner than later on these issues.”

On domestic gas

Focussing on the use of gas domestically, we asked Mr Ferguson if he thinks it would benefit Australia for the proposed Transcontinental Pipeline to go ahead, he said that the Minister for Infrastructure, Transport, Regional Development and Local Government – through Infrastructure Australia – will be looking at some of the long-term infrastructure opportunities in Australia. “And it’ll be interesting to see whether or not some of these proponents actually feed that into the Minister’s audit. But, in the end, I think a lot of people in Western Australia are currently focused on domestic West Australian and export gas opportunities.

“Investors have to decide, from their own point of view – given the regulatory environment which favours investment in Australia – whether they want to put in place the private sector investment which basically brings forward a Transcontinental Pipeline. But governments no longer do that infrastructure, I mean obviously we’ve privatised airlines and airports, and New South Wales is moving away from government ownership of their generational and retail sectors in the electricity industry at the moment.

“My job is to put the framework in place which carries investment, but private investors have to make the decisions as to how they spend their money.”

With coal seam gas projects developing well, particularly on the east coast, Mr Ferguson said that new fields and new developments may represent something new for Australia, with a number of key projects mooted in Gladstone, Queensland.

“They are getting tremendous support from the Queensland Government, which is creating an impetus for further investment,” said Mr Ferguson. “Now I just hope that we make real progress, because the way we’re going, it not only looks interesting from a domestic point of view, but we are clearly going to potentially end up with export opportunities out of these coal seam projects in Queensland, and that might mean even more jobs in places such as Gladstone.”

Mr Ferguson agreed that the development of LNG has a bright future, “Not only on the west coast but also the east coast. Which then means it’s got a bright future domestically, for industry and household consumption.”

And on Australia’s future

When we asked Mr Ferguson to reflect on the difference between the current and previous Government’s approach to gas and pipelines, Mr Ferguson listed climate change as a key difference.

“The industry is crying out for this issue to be resolved. They accept there’s going to be a price on carbon, so they want their government to actually work out a national system so they’ve got one system of regulation in Australia, and that’s the objective. That gives them certainty in terms of actually weighing up investment decisions, and that guarantees Australia’s economic future.

“I can also say that number of barriers to investment have got to be fixed, such as infrastructure, and also skills and training in Australia, because they’ve got so much investment on the horizon at the moment, if we don’t fix these issues, some of our resources including the petroleum industry are going to be supplanted, investments will go elsewhere, and once you miss out on that opportunity, you’re paying catch up for the rest of your life. So we just cannot afford to lose those investments.

“Capital investment is now more expensive than it should be, because of infrastructure and skills shortages. I mean, we’ve also got to work, as we are, through the National Offshore Petroleum Safety Authority (NOPSA) to guarantee for example in the offshore industry, that we’ve got the safest possible work environment and there’s a review of NOPSA starting today, it has been in place three years, to actually make sure that it’s performing to the best of its abilities.”

Mr Ferguson said that the government was dedicated to developing a plan to ensure that the gas industry would remain competitive in the future.

“One of my responsibilities out of this energy security assessment is to actually look at where we’re going to be in the next ten, twenty years time. For example, Bass Strait is important to us, but we’ve got to find another Bass Strait and we’ve got to now make sure the environment is there in place to encourage further drilling and exploration.”

Mr Ferguson highlighted the breadth of planning required for Australia’s long term energy security, given the complexity of the industry, from looking at investment, training and infrastructure to liaising with private sector, state and territory governments to develop appropriate frameworks.

“I’m working with my colleagues to guarantee that Australia is attractive for investment, and that also includes overcoming unnecessary regulatory measures. It’s about working with my ministerial colleagues on the skills front to guarantee that they are willing to train Australians, and in a complementary way, our consideration of migration in the current financial year. How we encourage kids in our high schools to actually want to work in the resources and energy sector that’s a great future.

“So, across the whole of government there are a variety of ministers who are working with me to overcome some of the issues that have been raised with me, and that also includes, for example, what we do with respect to exploration and drilling in frontier acreage, because you know we’ve got well-established fields such as Browse and that, but we’ve got to look to the future.”