The Hon Martin Ferguson is clearly excited about his role as Minister for Resources and Energy. As he put it recently at the Australian Petroleum Production & Exploration Association (APPEA) conference in Perth “resources and energy are the engine room of the Australian economy today” and developing Australia’s natural gas resources is high on his department’s agenda. Overall, the Minister thinks that Australia’s energy future is bright and secure.

“I think a lot of nations look at Australia with envy,” he says. “We’re very lucky; we’re well endowed and extremely rich in energy resources.”

A balancing act – investment, export and domestic markets

At the same time, the Minister recognises that his task to implement the right policy and regulatory settings is a challenging one.

Primary energy consumption in Australia is expected to increase at an average annual rate of 1.6 per cent between now and 2030. At the same time liquefied natural gas (LNG) production and exports have ramped up in Western Australia, and with Gladstone’s LNG developments in Queensland there is great opportunity for the east coast. Mr Ferguson recognises the complexity of balancing domestic gas supply security while encouraging foreign investment.

“Our energy future looks good both on the export and domestic fronts 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 says.

“We’ve got to not only be committed to exports and new exploration opportunities, but also make sure we guarantee Australia’s energy security.”

As one of the world’s ‘energy superpowers’, Mr Ferguson has said that Australia is placed front and centre in a debate about energy security. The solution, he says, lies in choosing the right pathway to energy security – through open and transparent global markets for resources and energy trade and investment.

A key component of this framework involves encouraging investment in exploration and production, particularly in new frontiers. Mr Ferguson has backed this with action, with seven of the 35 areas released in the 2008 Acreage Release designated frontier areas. However the Minister has said that key to getting more gas projects off the ground is creating partnerships between government and industry.

“This is an enormous challenge in an escalating cost and tightening investment and labour environment,” the Minister said recently. “But the rapidly growing LNG market in the Asia Pacific – and the Indian rim – will not wait for us.”

Australia has to ramp up exploration and production, whether that be through Australian or overseas investment. The Minister has said his department will be ‘rigorously’ applying the commerciality test to retention lease renewals and conducting a review of the retention lease system. In short, companies cannot just sit on their laurels and wait for foreign investment since acreage is in demand.

However the Minister highlights a number of broader barriers to accelerated growth in the gas industry, chief among them being infrastructure and skills and training.

“There is so much investment [potential] on the horizon at the moment, that if we don’t fix these issues, some of our resources including the petroleum industry are going to be supplanted, investment will go elsewhere, and once you miss out on that opportunity, you’re playing catch up for the rest of your life. We just cannot afford to lose those all that investment,” he explains.

He adds that the cost of investing in Australia is now more expensive than it should be, because of infrastructure and skills shortages. In view of this, he recently congratulated APPEA for its National Skills Shortage Strategy, directed at increasing training and employment opportunities for Indigenous Australians as well as women and mature age personnel.

“While the focus is often on governments to resolve the challenges faced by the industry,” he told APPEA 2008 conference delegates, “the reality is it requires a mighty – and constructive – partnership between us.”

Governance and minimising red tape

Acknowledging some concern over the burden of unnecessary red tape, over-regulation or central planning, Mr Ferguson is clear about the role of government in industry – governing is about encouraging investment in Australia and optimising commercial outcomes.

“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 have got to grasp the market opportunities.”

Mr Ferguson has welcomed the Productivity Commission's review of petroleum industry regulation, in which the Commission will review the regulation of natural gas projects that involve more than one jurisdiction and will consider options for a national regulatory authority to manage all regulatory approvals for the upstream petroleum industry.

Also under development are the proposals for the Australian Energy Market Operator and the National Gas Law, which has recently been introduced to the South Australian Parliament. Mr Ferguson reiterated to Gas Today that the National Gas Law represents the outcome of consultation with gas operators and state and territory governments.

He says that while the National Gas Law does involve a Bulletin Board, this is about creating a framework so that people have a better understanding of the national market and common operational rules across jurisdictions.

In the immediate future, Mr Ferguson says the Government will continue to nurture open and transparent dialogue with the gas sector.

“There will be no hidden agendas, it’s all going to be put in place and you [stakeholders and businesses] can work with some certainty,” he explains. “It’s about the increased use of gas for electricity generation in Australia, and that’s what the community wants.”

Climate change and an Australian ETS

Of course climate change policy is a major part of Australia’s energy industry future and Mr Ferguson believes that a balanced and nationally consistent set of climate change measures is the way forward not only for the environment but for the economy.

“We’ve got to make sure that we have got a nationally consistent set of climate change measures, because that guarantees cooperation. But this also says to the energy sector that we are attractive for investments and that there is one common system where we’ve got the balance right,” Mr Ferguson says.

The future for Australia’s natural gas industry

The other major challenge for Australia’s energy industry is technological development, not just for the benefit of Australia but for the world.

“We are very much a fossil fuel-dependent nation, there’s clearly going to be a growth in the renewable sector and the use of gas, but we have to get clean coal technology right.”

He explains that projects such as the Otway geosequestration project must be pursued as they are of great significance to Australia and the rest of the world. As developed and developing countries alike face the problem of rising CO2 emissions, Mr Ferguson explains that there is a lot of international interest in what Australia is doing.

Australia’s gas industry has a prominent place in Australia’s energy future and Mr Ferguson is keen to keep it that way.

“[The gas industry] has massive potential for 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.”