Thursday, 22 June 2017
Questions without Notice
Coal Seam Gas Mining
My question is to the Minister for Resources and Northern Australia, Senator Canavan. Minister, coal seam gas production in the Bowen Basin and Surat Basin averages $6 to $8 per gigajoule. This cost makes gas expensive in comparison—
Senator Cameron interjecting—
Minister, coal seam gas production in the Bowen Basin and Surat Basin averages $6 to $8 per gigajoule. This cost makes gas expensive in comparison to real prices and in comparison to gas produced off the coast of Western Australia. The uneconomic nature of coal seam gas production is likely to continue for decades. How can the government justify its proposal to spend $30.4 million over four years from 2017-18 to undertake scientific assessments on three prospective onshore, unconventional gas sites and a further $28.7 million to convince Australians that coal seam gas mining is good when we have cheap gas off the coast of Western Australia? Also, what is the government doing to address the impact coal seam gas mining has had on the health of families and children in Chinchilla in Queensland?
I thank Senator Hanson for her very detailed and reasonable question on these important matters for our country. Senator Hanson is right to say that coal seam gas production in Queensland typically is at a higher cost than in other countries, although the estimates that I am advised of range more from $4 to $8 a gigajoule. There are some areas that are more productive than others. Those projects proceeded when oil prices were much higher, and the production that is coming out of Queensland provides us the opportunity to meet the needs of Australia, particularly as the Bass Strait, our traditional source of oil and gas for many decades, declines. We are going to lose from the Bass Strait, on the Australian Energy Market Operator estimates, about a sixth of our domestic east coast consumption in the next year or so. That is a significant decline that we need to make up from other sources.
That is principally why the government has put forward that $90 million—to try to encourage more gas development. Senator Hanson mentioned the $30 million that we are putting towards finding new prospective areas of gas development and also the $26 million we are putting towards a gas acceleration program that partners existing producers in existing basins to bring gas to market sooner, to bring immediate relief for the high gas prices that are burdening our manufacturing sector and household bills. That is why the government is so focused on this. It is important for jobs, it is important for our country and it is important so households can balance their budgets. It is why we are taking such immediate and strong steps—
I will take that as a point of order on relevance, Senator Hanson. The minister was certainly exceptionally relevant to the first part of your question. If the minister gets to the second part of your question, we will wait and see what he has to say. He has 33 seconds left. He has been directly relevant.
I will do my best. I was just going to say that it is very important for us to look at other areas of the country for gas development. Not all of those areas are coal seam gas. Some areas are in shale or tight-gas sources, where costs of production may be much lower. I take Senator Hanson's point on the concerns on health and environmental impacts in Western Queensland, ones I am very familiar with myself. As part of this package I will be taking to the COAG Energy Council a template agreement for land access to areas, including in Western Queensland, to make sure we deal with some of those concerns that certainly exist in the community.
Minister, is it true that there are up to 80 proven and probable gas reservoirs that could supply the domestic market with gas but are not in production because you have not implemented a 'use it or lose it' policy, in combination with a condition on production licences that 15 per cent of the output annually be given to the domestic market?
I have not received any advice about 80 reservoirs and that order. However, I can confirm for the senator that the government has implemented a 'use it or lose it' policy and review across the country. That is a review that includes the offshore areas that the Commonwealth government is responsible for. We had agreement with the states and territories at the last COAG Energy Council meeting to conduct a similar review onshore, which my officials are working with state and territory officials to do.
I would point out to Senator Hanson that, in terms of the Commonwealth areas of responsibility, Bass Strait is a declining resource. There are some areas for which, just last week, we announced the terms of reference for the 'use it or lose it' review there. But there is a limited source of gas left available and it is becoming higher cost, with no oil left and higher degrees of mercury and carbon dioxide. In the west there are possible resources, too, but, of course, there is no connection at this stage to east coast markets. Any such connection in the future would be at some cost, either through a pipeline or a regasification facility on the east coast.
I thank Senator Hanson again. It is a very relevant and important question. The government fully supports those companies that are looking at that very question. The senator might be aware that AGL is apparently going through a process of looking at installing a regasification facility in southern markets. We fully support that. It is a commercial decision at this stage and it would be at cost, as I mentioned in an answer to an earlier question. It is not a free lunch. The estimates of gas costs coming in from the west through such a facility seem to be in the order of $9 to $11 a gigajoule. So there is quite a high cost for doing so. But, certainly, we as a government need to make sure that we look at all options to deal with these issues, not just in the next few years but over decades. We should be looking at other areas of potential resources, such as the Great Australian Bight. I welcome the support from the other side to make sure we continue to look at that, and I welcome Statoil's decision to continue to take on BP licences there. In the Northern Territory we need state governments to remove those moratoriums, because there are certainly very prospective potential resources there as well.