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2012: Exports grow despite policy challenges at home

Despite policy changes taking place, the Australian export industry continued to grow with a year of strong and sustained growth.

This was a dynamic year for the petroleum industry, driven by the enactment of Federal, state and municipal policies. These included the Federal Government’s carbon pricing scheme, Minerals Resources Rent Tax (MRRT) and Petroleum Resources Rent Tax (PRRT); various state-based coal seam gas (CSG) policies; and, several municipal CSG moratoriums and restrictive drilling policies.

It was also a year of strong and sustained growth, particularly in the LNG export industry. The scale of investment in LNG developments across Australia had reached $175 billion, and there was significant potential for this to continue rising.

This proliferation of CSG and LNG developments had facilitated growth in the pipeline construction industry, with a number of new gas pipelines announced, as well as significant capacity expansions of major gas transmission pipelines.

Pipeline works began for several major LNG developments, including the 540 km pipeline which would feed into BG Group’s Queensland Curtis LNG (QCLNG) Project; the Australian Pacific LNG (APLNG) Project; and, the Gladstone LNG (GLNG) Project. Construction had also commenced on the 885 km, 1,066 mm Ichthys gas export pipeline, located offshore Western Australia.

The industry saw a remarkable proliferation in drilling activity in the oil and gas sector, and in turn, an unprecedented media focus on the oil and gas industries, and in particular CSG.

The Federal Government’s carbon pricing legislation continued on its planned course, with the policy taking effect on 1 July. The legislation was embraced, albeit with selected criticism, from various industry bodies, including the Australian Pipeline Industry Association and the Australian Petroleum Production & Exploration Association (APPEA).

The APIA 2012 Convention Business Sessions.

APPEA put forward the position that the association supported a national climate change policy that “delivers abatement at least cost and facilitates investment decisions consistent with there being an international price on carbon.”

APPEA stated that “The introduction of a carbon price mechanism provides the perfect opportunity to examine whether flexible and cost-effective actions to reduce emissions are indeed occurring and whether the policies in place support least cost action.

“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 risk of climate change. Developing Australia’s substantial natural gas resources for domestic use and for export in the form of LNG can provide significant national economic and social benefits, and significant international greenhouse gas abatement.”

In a submission to the Joint Select Committee on Australia’s Clean Energy Future Legislation, APIA stated that the association supported of ‘an efficient carbon price.’

On 19 March, the extensions of the Petroleum Resource Rent Tax (PRRT) legislation were passed by the Senate. The PRRT legislation formed part of a wider package of reforms, including the introduction of the Minerals Resources Rent Tax (MRRT). The legislation included four PRRT Acts which extended the existing offshore PRRT regime to all oil and gas production in Australia from 1 July.

Offshore activity during the year was dominated by the majors and large independents, whose drilling was primarily focused on the discovery and evaluation of significant gas resources needed to feed the numerous planned floating and conventional LNG plants. Woodside and Chevron were the most active of the offshore players, spudding 17 and 9 wells respectively, or more than half of the total for the year.

The APIA 2012 Exhibition Hall.

A key fixture at the end of 2012 was the negotiation between governments on the proposed PRRT and various CSG policies, and how the industry could mitigate the inevitable effects that the carbon price was set to impose.
Furthermore, the ability of industry and government to work together on addressing the skilled shortage issue was to be of paramount importance to the petroleum industry in the years ahead. With the burgeoning resources and LNG sector looking to scale new heights, strong and consistent policy would be required so that the industry could maintain its current level of productivity and profit.

By the end of the year, predictions for the Australian oil and gas industry were very positive. Australia was touted by several industry commentators to be one of, if not the largest gas exporter in the world. Balanced with favourable economic conditions, Australia’s energy future was looking very hopeful.

This article was featured in the 2018 APGA 50th Anniversary celebration book.

If you have news you would like featured in The Australian Pipeliner contact Managing Director David Convery at dconvery@gs-press.com.au

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