Address to the Queensland Exploration Breakfast
Brisbane
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Introduction
It’s a pleasure to be back in Brisbane to address the Queensland Exploration Breakfast.
I have just come from Perth, so from one resource powerhouse state to another, after participating in the Commonwealth Business Forum as part of CHOGM.
In the course of this forum I met and talked with many ministers and industry representatives from around the Commonwealth and particularly those from resource rich nations.
These conversations in large part centred on the expertise of Australian mining companies, the world class nature of Australian energy and resource reserves and projects, and the way in which our nations could work in partnership to maximise the economic benefits from the development of our natural resources.
Queensland projects are a prime example of this.
As you know Queensland is home to a new coal seam gas to LNG industry.
And while not without its challenges – which I will return to in a moment – this, along with the floating Prelude LNG project sanctioned by Shell, means that Australia will be the only nation in the world to utilise all three forms of LNG production.
In terms of coal, we are seeing major expansions here in Queensland, including the development of an entirely new coal province – the Galilee basin.
Much of this development is being funding through foreign investment from the major emerging economies of India and China, but also from traditional partners like Japan Korea, France and the UK.
In fact there is well over $200 billion in capital expenditure committed to resource and energy projects nationally at the current time - $140 billion of that in LNG, of which $45 billion has been committed here in Queensland.
All this in the context of the Government’s resource taxation and carbon price reforms.
I simply say, the figures - or should I perhaps say the Final Investment Decisions – speak for themselves, in terms of Australia's attractiveness as an investment destination.
Our export earnings from mineral and energy commodities are at record levels, and are set to climb even higher.
The resilience of the industry in Queensland in coping with – and rebounding from the floods is central to this success.
I recognise that these have been tough times, particularly with flooding of some open cut mines, and that for some the recovery operations are ongoing.
But overall, the take-out message, certainly for those looking from the outside into Australia, was that even during the most difficult of times, Australia’s resources sector is sufficiently large, diverse and mature to ensure we remain a reliable supplier even during times of adversity.
Exploration
Key to the strength of the industry into the future is continued investment in exploration.
So in this context I welcome the release this morning of the inaugural Queensland Exploration Scorecard.
This is an important initiative – it is vital that industry shares with us its thoughts on how we can promote resource exploration, and it is important that performance is measured in a tangible way.
Exploration in Queensland is in exceptionally good health.
And overall the scorecard shows that exploration is growing strongly in Queensland— primarily in response to the unprecedented demand for resource and energy commodities in our region and in recognition of your high prospectivity.
Queensland is home to 24 per cent of both minerals revenue and exploration in Australia.
So there is capacity for further growth, and I support the Queensland Resources and Exploration Councils in your endeavours to achieve this.
The pace of activity is good for your members, good for jobs and good for the Queensland economy.
For instance, in the Bowen Basin more than 50 mining projects worth $25 billion are being considered and in the past year projects worth around $5 billion have commenced construction.
These projects create jobs, sustain communities and generate returns for both industry and government.
The strength of exploration nationally is evident in the recent figures from the Australian Bureau of Statistics.
In seasonally adjusted terms, estimated mineral exploration expenditure rose 4.4 per cent in the June quarter, with the largest rise here in Queensland, where expenditure rose by an impressive 26 per cent to total around $45 million.
In seasonally adjusted terms, total metres drilled rose by 6.7 per cent in the June quarter.
Drilling in areas of existing deposits rose 39 per cent.
But most importantly drilling in areas of new deposits rose 58 per cent.
This increase in exploration suggests that Queensland’s resources sector is increasingly competitive.
At the same time, the scorecard indicates that if growth in exploration and mining activity is to continue, we must address a range of key issues, including labour and skills shortages, better community consultation and regulatory matters.
The challenge of unconventional gas
The exploration statistics also demonstrate that unconventional gas is becoming ever more important.
This is the case both in Queensland and nationally.
Geoscience Australia puts demonstrated and inferred coal seam gas resources at over 150 trillion cubic feet.
Already coal seam gas accounts for 30 per cent of eastern states’ gas production.
The three CSG to LNG projects that have been sanctioned here in Queensland will increase gas production by 20.8 million tonnes per annum – the equivalent of our current export volume.
While much of this production will serve export markets, the development of these reserves can also provide domestic supply opportunities – as evidenced currently by the significant quantities of ramp gas in the market here in Queensland.
This will be of growing relevance given the forecast increase in demand for gas – both global and domestic – as a cleaner burning, transitional fuel for a low-carbon economy.
However, as the importance of coal seam gas increases in an energy security context, so too has the level of public debate about the role of CSG as an energy source.
The fundamental importance of landholder and community engagement, as well as effective regulation, has never been clearer.
Of course approvals processes, environmental standards and land access arrangements are regulated at the state level, unless there are matters of national environmental significance involved.
As suggested in your scorecard, governments need to ensure that their regulations and planning are aligned with the expectations of both the community and industry, and that adequate environmental safeguards are in place.
Regulators must be well-resourced and diligent in carrying out their functions.
Events of 2009 and 2010 in the offshore petroleum industry – both here and in the United States – serve as a stark reminder of the dangers of complacency.
That’s why the Commonwealth – through my department – is working cooperatively with states and territories as they explore options to achieve a greater degree of harmonisation of CSG regulation.
Together, governments and industry must give the community confidence in the safety and environmental integrity of resource and energy operations.
At the same time, industry must also be allowed to get on with the job.
Companies operating within the law and the established regulatory framework that are exploring for new deposits, of coal seam gas, coal or any other commodity must be able to do so unimpeded.
While recognising the legitimate concerns of some landholders and members of the community, I simply say that disruptions such as those we are seeing currently at Santos’ pilot well site near Spring Ridge led by activists are unacceptable.
I would also remind farmers about the motivation of some of these green NGOs. Fundamentally, many of these groups are against economic development in all its forms – and once they have moved on from protesting against CSG, they could very well have farmers in their sights as their next target.
Helping industry to grow
I now turn to what the Government is doing to foster growth in our resources and energy sector.
Firstly, given the focus of today's event, let me touch on the Government's investment in exploration activities.
In the May 2011 budget the Government allocated an additional $65.3 million to Geoscience Australia to support its important activities.
The Strategic Review of Geoscience Australia was released in May this year, and highlights the important role that GA plays in undertaking pre-competitive work.
For instance, calculations show that work under the Offshore Energy Security Program for the period June 2006 to June 2011 delivered a return on the Government's $75 million investment of $625 million in committed frontier exploration expenditure in acreage awarded to date, with an additional $1 billion for secondary work programs.
We see here the important role that pre-competitive work and exploration have in bringing on investment in our resources and energy sector more broadly.
Moving on from exploration, the Queensland Exploration Council’s scorecard correctly identifies the issue of labour and skills shortages as a key barrier to growth.
The Commonwealth Government’s $3 billion skills and training investment in this year’s budget represents a significant commitment to overcoming this barrier.
The National Resources Sector Workforce Strategy and longer-term reform of vocational education and training are part of our plan.
The industry-led National Apprenticeships Program will see 1,000 semi-skilled workers gain full trade qualifications in 18 months.
I recently launched the Banana Skills Trade Training Centre in Biloela – an initiative that will allow young people to train locally for a career in the resources sector.
At the same time, industry and universities are working with the Commonwealth to increase engineering and geoscience graduates.
In the immediate term, our decision to introduce new Enterprise Migration Agreements and streamline existing migration arrangements will improve industry’s access to overseas labour, helping major resources projects meet their labour needs.
Our Fly-in Fly-out pilot, which is kicking off first in Cairns and is then being expanded elsewhere, will promote labour mobility to assist the resource and energy sectors while also hopefully reducing higher unemployment rates in some localised areas.
The Government is committed to ensuring the benefits of natural resource development extend to our Indigenous communities in a practical, long-term way.
To this end, the Government recently released an Indigenous Economic Development Strategy, in which the resources industry is a key partner.
The Memorandum of Understanding the Government signed with the Minerals Council of Australia focuses on Indigenous employment and enterprise development.
It aims to facilitate Indigenous participation in the minerals industry, and contribute to positive socio-economic outcomes in Indigenous communities.
And of course we want to maximise the opportunities for Australian companies to supply goods and services to major resource and energy projects, on the basis of fairness and competitiveness.
That’s what our $34 million Buy Australian at Home and Abroad initiative is all about.
For those who haven’t already I encourage you to engage with the work being led by a man familiar to you all – Peter Beattie – and tap into the many programs led by my colleague, the Minister for Innovation, Senator Kim Carr.
Resource Taxation Reform
In closing I want to also provide you with a brief update on the progress of the Government’s resource taxation reforms.
These reforms are a key tool for the Government to help spread the benefits - and mitigate the pressures - arising from the mining boom across the broader economy.
We have consulted closely with you over the last 18 months as we have gone about finalising the detailed design and the legislation to establish the MRRT and extend the PRRT.
Maintaining the international competitiveness of our resources industry has been top of mind in this work.
The final legislation that the Government will shortly introduce into the House of Representatives upholds the Heads of Agreement and reflects the recommendations of the Policy Transition Group (PTG) and subsequent consultations through the Resource Tax Implementation Group.
You would recall that the PTG closely examined the issue of exploration –dedicating, in fact, an entire report to the subject.
It concluded that improving regulatory arrangements would be far more effective in increasing exploration expenditure than would a flow through share scheme.
Indeed, chart 16 of your scorecard supports the conclusion that operational factors, like policy uncertainty and environmental regulations, have a greater impact on investment than taxation.
The PTG recommended that the Productivity Commission consider the regulatory barriers to further exploration in Australia – a task, I can report, the Productivity Commission is scheduled to start during 2012.
Conclusion
In conclusion, I reiterate that exploration is fundamental to a strong future for Australia’s energy and resources industries.
The Australian Government will continue to work with industry to manage pressures and support continued growth.
By working together, we can make the most of the opportunities presented by these extraordinary times.
Thank you.