UNi V' I 1 I LLL* ' I . m.
AUSTRALIA'S ENERGY PROSPECTS FOR THE 1980s
SPEECH DELIVERED
ON BEHALF OF
THE PRIME MINISTER
THE HON R. J. HAWKE
BY
THE MINISTER FOR
SENATOR RESOURCES AND ENERGY
PETER WALSH
AUSTRALIAN INSTITUTE OF ENERGY/ INSTITUTION
OF ENGINEERS CONFERENCE
" ENERGY ' 83"
CANBERRA
13 MAY 1983
I AM VERY PLEASED TO BE SPEAKING TO YOU TODAY ON A TOPIC WHICH
WE ALL ACKNOWLEDGZE TO BE OF TREMENDOUS IMPORTANCE TO
AUSTRALIA. THE VERY FACT THAT THIS CONFERENCE, DEVOTED TO
ENERGY IN AUSTRALIA IN 1983, IS BEING HELD ATTESTS TO THE
SIGNIFICANCE OF ENERGY FOR ALL OF US.
THIS CONFERENCE IS VERY IMPRESSIVE IN BOTH THE SCOPE OF THE
SUBJECTS IT IS CONSIDERING AND THE LEVEL OF PARTICIPATION. I
NOTE THAT IT HAS LOOKED AT ENERGY POLICY IN THE CONSTITUTIONAL
SETTING, ENERGY AND THE ENVIRONMENT, ENERGY AND MANPOWER, AS
WELL AS THE MORE FREQUENTLY DISCUSSED TOPICS, ENERGY PLANNING,
PRICING AND SIJ? PLIES.
AND IT IS IMPORTANT THAT WE CONTINUE TO ADDRESS THESE QUESTIONS
AND AVOID ANY TENDENCY TO COMPLACENCY WHICH MIGHT BE ENGENDERED
BY THE PRESENT EASING OF INTERNATIONAL OIL PRICES.
INTERN'ATIONAL 0UIL SITUATION
THE CURRENT INTERNATIONAL OIL SITUATION IS CHARACTERISED BY
DECLINING DEMAND, EXCESS PRODUCTIVE CAPACITY AND UNCERTAINTY
ABOUT THE FUTURE COURSE OF PRICES, PARTICULARLY OVER THE MEDIUM
TERM. THE PRESENT LOW LEVEL OF DEMAND FOR OIL RESULTS LARGELY FROM
THE SUBDUED LEVEL OF GLOBAL ECONOMIC ACTIVITY AND THE EFFECTS
OF CONTINUING FUEL SUBSTITUTION AND CONSERVATION, INTRODUCED IN
RESPONSE TO THE OIL PRICE SURGES OF 1973-74 AND 1979-80.
THE RECENT OPEC AGREEMENT TO CUT THE PRICE OF ARAB LIGHT OIL,
ITS REFERENCE PRICE, BY $ US5 A BARREL TO $ us29 A BARREL WAS THE
FIRcST MAJOR PRICE CUT EVER AGREED TO BY OPEC.
THERE ARE INDICATIONS THAT OPEC'S EFFORTS TO STABILISE THE
MARKET IN THE FACE OF DECLINING DEMAND MAY BE SUCCESSFUL.
OPEC MEMbERS HAVE HELD TO THEIR AGREEMENT SO FAR
NON-OPEC SUPPLIERS, NOTABLY THE UK, MEXICO AND THE USSR,
HAVE ADJUSTED THEIR PRICES IN LINE WITH OPEC PRICES
PRIC: S ON THE SPOT MARKET HAVE FIRMED. MANY KEY CRUDE
OIL PRICES ARE NOW CLOSE TO OR AT OFFICIAL LEVELS.
NONETHELESS, THE OUTLOOK FOR THE OIL MARKET BEYOND 1983 REMAINS
UNCERTAIN. MUCH WILL DEPEND ON FACTORS SUCH AS MAINTENANCE OF
DISCIPLINE Wi-. i-SI OPEC RANKS; EFFECTS OF A RUN-DOWN IN
CONSUMING COUTRiES' OIL STOCKS WHICH COULD DELAY RECOVERY IN
DEMAND FOR OPEC UIL: AND THE EFFECTS ON OIL MARKETS OF RECOVERY
IN THE WORLD ECONOMY,
AUSTRALIA'S EINE bY RESOURCES AND EXPUORTS
AUSTRALIA, OF C iuPSE, IS WELL ENDOWED WITH MOST ENERGY
RESOURCES AND IS ONE OF THE FIVE OECD/ DEVELOPED COUNTRIES THAT
ARE NET ENERGY EXPORTERS ( ALONG WITH THE UK, CANADA, NORWAY AND
THE NETHERLANDS).
THIS HAS PLACED US IN A SPECIAL POSITION WITH RESPECT TO ENERGY
DEVELOPMENTS IN RECENT YEARS.
fNi 1981-82 THE VALUE OF OUR ENERGY EXPORTS WAS $ 3.4 BILLION OR
17.5% OF THE TOTAL. VALUE OF EXPORTS. HOWEVER, BECAUSE OF
INCREASED OIL PRICES, THE VALUE OF OUR NET BALANCE OF TRADE IN
ENERGY HAS DECLINED IN RECLNT YEARS IN 198i-82 THERE WAS ONLY
A SLIGHT SURPLUS.
iLACK COAL EXPORTS ACCOUNIED FOR 67 PER CENT OF THE VALUE OF
UUR ENERGY EXPORTS IN 1981-82, AND OUR STEAMING COAL EXPORTS
iAVE RISEN STRONGLY RECENTLY. OUR OTHER MAJOR ENERGY EXPORTS
ARE URANIUM AND LPG.
AS A CONSEQUENCE OF THE PRESENT DOWNTURN IN ThE WORLD ECONOMY,
AND REDUCED OIL PRICES, THE OUTLOOK FOR OUR MAJOR ENERGY
EXPORTS IS UNCERTAIN IN THE SHORT TERM.
YOU WILL BE AiARE OF RECENT DEVELOPMENTS IN INTERNATIONAL COAL
MARKETS AND THE AUSTRALIAN COAL INDUSTRY. SIMILARLY, PROSPECTS
FOR INCREASED EXPORTS OF, FOR EXAMPLE, LNG HAVE BECOME CLOUDIER.
THESE INTERNATIONAL MARKET DEVELOPMENTS HAVE THE EFFECT OF
INCREASING THE PRESSURE ON OUR RESOURCE PROJECTS TO MAINTAIN
THEIR COMPETITIVENESS.
TiE GOVERNMENT, HOWEVER, BELIEVES THAT AUSTRALIA'S RESOURCES
INiUSTRIES FACE A VERY BRIGHT LONG TERM FUTURE. AT THE SAME
! IME, AS INDICATED IN ITS RESPONSE TO THE PRESENT COAL INDUSTRY
SITUATION, IT IS TAKING ACTION TO ASSIST THESE INDUSTRIES IN
'! iE SHORT TERM. THE GOVERNMENT HAS CONSULTED WITH THE
PRODUCERS AND UNIONS TO DEVELOP A CO-OPERATIVE APPROACH TO
SOLVINU PROBLtMS IN THE COAL INDUSTRY. IT IS PUTTING A STRONG
1MPHASIS ON gEVELOPING EXPORT MARKETS.
AUSTRALIA: LIQUID FUEL PROSPECTS
. RUjLD UIL AND PETROLEUM PRODUCTS ARE AUSTRALIA'S ONLY
slGNiFICANT IMPORTS OF ENERGY. WHILE THE QUANTITY OF IMPORTS
JrE HESE FUELS HAS REMAINED RELATIVELY CONSTANT SINCE THE EARLY
L JOS, THEIR COST HAS INCREASED MORE THAN TEN-FOLD OVER THE
r,:, I'HEiLESS, AUSTRALIA HAS A RELATIVELY HIGH LEVEL OF
L. L-rSUFFICIENCY IN LIQUID FUELS OF ARQUND TWO-THIRDS OF ITS
AJJ ., r. MENTS A POSITION WHICH MANY COUNTRIES ENVY.
L,,: EST FORECASTS, BASED UN ESTIMATED PRODUCTION FROM KNOWN
. t.. RVES, SUGGEST THAT SELF-SUFFICIENCY SHOULD PEAK AT
/ o FER CENT IN 1981-85, AS ADDITIONAL CRUDE OIL AND CONDENSATE
.; uPLiES FROM THE COOPER BASIN, BASS STRAIT AND NORTH-WEST
-, HltF COME ON STREAM, COMBINED WITH FORECAST LOWER LEVELS OF
i'EIROLEUM FUELS DEMAND.
HOWEVER, PRODUCTION COULD DECLINE SIGNIFICANTLY AFTER THE MID
1980S AS BASS STRAIT RESERVES FALL AND FORECAST DEMAND
INCREASES UNLESS THERE ARE SIGNIFICANT NEW DISCOVERIES.
IT IS INTERESTING TO NOTE THAT AUSTRALIA DOES HAVE REASONABLE
PROSPECTS FOR ADDITIONAL OIL DISCOVERIES AND THEIR DEVELOPMENT
OVER THE NEXT 10 YEARS. THE BMR HAS ESTIMATED THAT THERE IS A
PER CENT PROBABILITY OF FUNDING AT LEAST 1 800 MILLION
BARRELS OF Uli., IE ALMOST EQUIVALENT TO THE PRESENT LEVEL OF
AUSTRALIA'S OIL RESERVES. THE BMR SUGGESTS THAT ABOUT HALF OF
THESE RESERES iAY BE DISCOVERED IN THE NEXT 10 YEARS.
IF THE BMR ESIiMATES ARE REALISED, AUSTRALIA'S LIQUID FUEL
SELF-SUFFICJENCY COULD EXCEED 80 PER CENT DURING THE DECADE TO
1991-92.
TURNING BRIEFL' TO NON-CONVENTIONAL LIQUID FUELS, I WOULD JUST
LIKE TO SAY THAT THE TIMING OF DEVELOPMENTS IS VERY UNCERTAIN;
CURRENT INDICATIONS ARE THAT PRODUCTION OF SYNTHETIC LIQUID
FUELS FROM OIL. SHALE, COAL AND METHANOL WILL NOT BE OF
SIGNIFICANCE i'i AUSTRALIA UNTIL THE 1990S OR BEYOND,
PELFtL PRICES
i'USTRALIA HAS ASO ENJOYD THE BENEFITS OF THE THIRD CHEAPEST
AVLRAGE PETROL PRICE AMONG OECD COUNTRIES, ONLY CANADA AND THE
USA HAVE LOWER P; TROL PRICES. AND AUSTRALIA'S AUTOMOTIVE LPG
PR7CES ARE THE LOWEST OF ALL IN THESE COUNTRIES. THESE
R: LATIVELY LOW PRICES CAN LARGELY BE ATTRIBUTED TO THE LOWER
LEViFL OF IAXATION APPLIED TO THESE FUELS IN AUSTRALIA
l_\ Nt~. Y POLICIES
AUSTRALIA'S RELATIVELY FAVOURED POSITION IN REGARD TO ENERGY
RESOURCES SHOULD NOT BE A CAUSE FOR COMPLACENCY. IT DOES NOT
DIMINISH THE NEED FOR APPROPRIATE ENERGY POLICIES FROM THE
GOVERNMENT.
THE GOVERNMENT RECOGNISES THE IMPORTANCE OF PRICE INCENTIVES TO
STIMULATE THE EXPLORATION FOR AND DEVELOPMENT OF ADDITIONAL
ENERGY RESOURCES. SO DID THE PREVIOUS LABOUR GOVERNMENT WHICH,
IN SEPTEMBER 1b75, ESTABLISHED THE POLICY OF IMPORT PARITY
PRICING FOR ' NEW' OIL.
PRESENT ARRANGEMENTS FOR TAXING EXTRACTIVE INDUSTRIES,
PARTICULARLY ENERGY RESOURCES, ARE FRAGMENTED, COMPLEX AND
ARBITRARY. miE GOVERNMENT ATTACHES IMPORTANCE TO IMPROVING
THESE TAX ARRANGEMENTS. IT WILL MAKE CHANGES WHICH WILL
ENCOURAGE PRODUCTION, INCREASE EFFICIENCY AND ENSURE AN
APPROPRIATE CONTRIBUTION TO REVENUE.
MY COLLEAGUES AND I ARE LOOKING AT A NUMBER OF MEASURES TO
IMPROVE RESOURCE TAX ARRANGEMENTS, INCLUDING A RESOURCES RENT
TAX. ALL INTERESTED PARTIES, INCLUDING PRODUCERS AND THE
STATES, WILL BE CONSULTED IN THE DEVELOPMENT OF SUCH MEASURES
BEFORE THEY ARE CONSIDERED BY THE GOVERNMENT. IN RESPECT OF A
RESOURCE RENT TAX SUCH A TAX WILL NOT BE INTRODUCED WITHOUT
ADEQUATE CONSULTATION WITH INDUSTRY AND OTHER INTERESTED
PARTIES. THE GOVERNMENT WILL, THEREFORE, BE GUIDED BY THREE PRINCIPLES
IN DEVELOPING ENEfRGY POLICIES FOR AUSTRALIA. IT WILL SEEK TO:
ENSURE SUFFICIENT ENERGY SUPPLIES ARE AVAILABLE
ENCOURAGE TrK MOST EFFICIENT RESOURCE PRODUCTION
ENSURE THAT THE BENEFITS OF RESOURCE DEVELOPMENT ARE
SHARED EQUITABLY AMONGST THE WHOLE COMMUNITY.
INiCREASING ENERGY PRODUCTION IS IMPORTANT TO ALL OF US, WHETHER
qE BE GOVERNMENT, PRODUCERS OR CONSUMERS. iMPROVING ENERGY
USAGE., WHETHER IT IS THROUGH TECHNICAL DEVELOPMENTS OR A MORE
EFFECTIVE FRAMEWORK FOR ANALYSIS AND DECISION MAKING, IS
EQUALLY IMPORTANT. THE GOVERNMENT IS VERY CONSCIOUS OF THE
3ROAD SCOPE OF ENERGY ISSUES AND WILL MAKE A FIRM CONTRIBUTION
TOWARDS EFFECTIVE ENERGY POLICY.
LAUIES AND GENTLENEN. ThiANK YOU.