Good morning ladies and gentlemen.
It is a pleasure to be here in Houston today to address the “Energy in an Evolving World” conference, and I thank the Chamber of Commerce for hosting the event.
Energy is top of mind for governments, business, and increasingly, individual citizens here in the United States, back home in Australia, and around the world.
Energy supply, energy demand, energy security, energy costs, energy innovation, energy infrastructure and energy sources – particularly clean and renewable technologies – are being assessed, examined and debated.
But the underlying theme binding all of these together is investment in energy.
Earlier this week in his State of the Union address President Obama reflected on our changing world and the challenges – and perhaps more importantly – the opportunities this change presents.
The President spoke about the need for investments that will strengthen security, protect the planet and create new jobs.
The need to invest in the energy of tomorrow.
The fundamental importance of investment runs through all three dominant themes for the world’s energy policymakers – global growth, energy security and innovation.
Investment is required for innovation and to meet our growing energy needs in a reliable manner.
Can I simply say that this investment requirement is common to both our countries.
My message to you today, indeed as it has been over the course of my week here in the United States, is that Australia is a very attractive destination for such investment.
This is not a new message but it is one certainly worth repeating.
Clearly, as Australia’s Minister for Resources and Energy this is something you would expect to hear from me.
But it is also something that an increasing number of American companies are finding out for themselves.
US Energy Investment in Australia
It is worth reflecting on some of the major US investments we have seen in Australia's energy sector in the past few years.
Where else could I start other than the AUD$43 billion Gorgon project (and I don’t even need to translate the Aussie dollar figure, given that we have been trading around parity for some time now).
Chevron, ExxonMobil, and their partners in this venture are progressing what will be Australia’s largest ever resources project and one of the world’s largest natural gas projects.
The project will cross many new frontiers, both geological and technical.
ExxonMobil is of course also investing in Bass Strait, off Australia's southern coast, and demonstrating that these reserves are by no means exhausted.
Apache has been operating off the coast of Western Australia for some time now and has been joined by the relative newcomer, Hess.
ConocoPhillips has its LNG train in Darwin and is a partner in the Australia Pacific LNG Project in Queensland – its stake in our fast growing coal seam gas to LNG industry.
And of course Peabody Energy has substantial coal operations in New South Wales and Queensland.
Some of their operations have been affected by the recent flooding in Queensland but clean up and rebuilding efforts across the state are well underway, and I am confident that we will see a resumption of normal operations sooner rather than later.
What these investments show is that we have a vast, accessible endowment of energy resources, a solid track record as a reliable supplier, and of course are ideally positioned to service Asia’s growing markets.
Global growth
And what growth we are seeing.
The International Energy Agency’s most recent World Energy Outlook predicts that global electricity demand is expected to grow by just over two per cent a year.
Non-OECD countries will account for most of that growth.
In China alone, electricity demand will triple by 2035.
Try to picture in your mind every power station in the United States today – and that’s how many China alone is expected to build over the next 15 years.
At the same time we need to remember that one-in-five people still have no access to electricity.
This is a significant development challenge.
All energy sources have a role to play in meeting energy demand, including, over the medium term, fossil fuels.
By 2035, the World Energy Outlook predicts the share of fossil fuels in the global energy mix will have fallen from 68 per cent to 55 per cent – but that is still more than half.
The share of coal in electricity generation will decline, but will still account for a third.
And remember, given the huge increase in energy demand, global demand for every fuel will increase in real terms by 2035, and fossil fuels will account for over half the increase in total primary energy demand.
Its qualities as a readily accessible, lower emission, baseload fuel make gas the transition fuel of choice, and the growth in demand for gas will far outweigh that of other fossil fuels.
And while the share of modern renewable energy will double by 2035, it will still be less than 15 per cent.
We know that the deployment of renewable energy is not without its challenges – whether these are commerciality, reliability or affordability.
So, until our hard work in deploying cleaner energy pays off, fossil fuels will continue to have a critical role in maintaining energy security.
Securing a reliable supply of these materials is crucial to maintaining international stability.
And that brings me back to Australia.
Australia as an investment hub
Currently estimated at $33 trillion, the size of the investment required in energy related infrastructure – whether we use fossil fuels or renewable technology – is substantial to say the least.
Australia is an increasingly important investment hub for energy resources in the world’s fastest-growing region.
The strong performance of the Australian resources sector over the past decade looks set to continue.
Earnings from Australia’s mineral and energy exports are expected to increase by more than a quarter to around $170 billion in this financial year.
Last financial year, new capital expenditure was the second highest on record – double the 30-year average.
More than 70 new projects are at an advanced stage of development, with a capital expenditure of $132 billion – another Australian record.
Exploration – the lifeblood of future projects – is also growing.
In real terms, petroleum exploration expenditure in Australia last financial year was the third highest on record and – as with capital expenditure – was nearly double the average of the past 30 years.
But the export of LNG is by far our biggest growth area.
Over the past 12 months we have seen final investment decisions on the $43 billion Gorgon LNG project, BG Group’s $15 billion Curtis Island LNG project and, most recently, the Santos, Petronas, Total and KOGAS $16 billion Gladstone LNG project.
They dwarf any other industrial project – and they exemplify Australia’s growing resource capacity.
They demonstrate our capacity as a major, reliable supplier of energy to the growing economies of the world.
Australia's strategic importance becomes clear when you consider that we have almost 20 per cent of OECD gas reserves.
Our exports make up 9 per cent of global seaborne trade.
Natural gas demand is set to continue its long-term upward trajectory, and I believe it will be the world’s key transition fuel.
According to the IEA, it is the only fossil fuel for which demand is expected to be higher in 2035 regardless of what climate change policies are implemented over the next 25 years.
The capacity of gas fired generation to respond rapidly to changing demand for, or supply of, electricity means that it has an important part to play in facilitating the effective integration of electricity generated from renewable sources, such as wind and solar, into our national and transnational electricity grids.
If planned projects in Australia are developed, Australia’s LNG production will triple within a decade, and we will go from the fourth to the second largest LNG exporter in the world by 2015.
But if the LNG industry is to meet its full potential it is critical that it maintains its social licence to operate.
For onshore producers of unconventional gas, including the proponents of Australia’s Coal Seam Methane based LNG projects this means doing the scientific work necessary in order to reassure neighbours and landholders that their interests will not be adversely affected by these important projects.
For offshore producers it means that the lessons from Macondo and Montara must be applied quickly and comprehensively.
In this regard there has been much co-operation between US and Australian regulators, co-operation I know will continue when Australia hosts an international conference on how regulators can best apply the lessons from these two incidents.
In the interim the Australian Government intends to proceed with establishing a new national structure for regulating Australia’s existing “safety case” approach in offshore areas.
It is noteworthy that both Australia’s “safety case” regime and the proposed national structure are consistent with the conclusions reached by the US Presidential Commission into Deepwater Horizon.
Low-carbon innovation
There is plenty of scope for investment in Australia in low-carbon innovation too.
The United States and Australia are largely on the same page when it comes to the transition to a cleaner energy mix.
We both know we cannot pin our hopes on one fuel type or technology; we need a range of technologies.
Both Australia and the United States have impressive renewable energy resources including solar, wind, wave and geothermal – most of which are yet to be fully exploited.
Harnessing these renewable resources and scaling-up new technologies means overcoming many challenges.
That’s why the Australian Government has committed $5 billion to the Clean Energy Initiative – to foster innovation and demonstrate technologies at commercial scale.
The Initiative includes:
· The $1.44 billion Solar Flagships Program to support the construction and demonstration of large-scale solar power stations;
· $1.81 billion for the Carbon Capture and Storage Flagships Program; and
· $150 million to the Australian Solar Institute to help reduce the costs of solar technologies.
Even the most cost-competitive renewable energy technologies - such as wind - require policy support to realise their potential.
That is why the Australian Government has also legislated the Renewable Energy Target of 20 per cent by 2020 to unlock billions of dollars of investment for new renewable energy projects over the next decade, and help drive innovation across the energy sector.
To spur more innovation, Australia is working with the United States on several major projects.
The Solar Research Collaboration Initiative, which was announced by Secretary Clinton and Prime Minister Gillard in Australia last year, supports joint projects designed to cut the cost of solar energy, with funding of up to $50 million from the Australian Government.
We also welcomed a $500,000 grant from the US State Department to support the work of the Global Carbon Capture and Storage Institute in developing countries.
This important work includes case studies on creating the best enabling environment for CCS deployment.
Finally, Australia is playing an active role in the US-led Clean Energy Ministerial, where governments, businesses and other organisations are working together to accelerate the world’s transition to clean energy.
Conclusion
Ladies and gentlemen the Australian Government understands that to meet the world's future energy needs there will need to be diversity in both the nature and source of energy, and that success hinges on investment.
Often, the attractions of investing in Australia seem so obvious that we take them for granted.
Let me take a moment to remind you:
· Stable government
· Security
· The rule of law
· A cohesive society
· Low inflation
· A highly-skilled, outward-looking workforce
· Modern infrastructure
· World-class hotels and venues, including in Perth, which I note will host LNG-18 in five years
· First-rate transport links
· World-class regulation of the petroleum industry
· And some of the best wine in the world to relax with at the end of the day.
Few investment destinations can rival Australia.
My cabinet colleagues and I are determined that Australia be a major destination for the investment that will underpin the world's future energy security.
Thank you.