Ladies and gentleman, and can I particularly acknowledge the organising committee from the Chamber and, in particular, your president Andrew Bower.
It’s great to be in Texas today. And what better place to be than Houston, the world’s energy capital and one of the most entrepreneurial cities in the United States.
Not only the energy capital, but also home to the Houston Texans football team who are sponsored by the big Australian, BHP Billiton.
It has been a dynamic and exciting time in the industry these past few years.
The shale gas revolution has transformed the sector, especially here in North America. And the flow-on effects to the rest of the world are also being felt as new companies discover opportunities in hydraulic fracturing and oil sands.
The resulting effects on the price of energy are having a profound impact on the US and the global economy.
As the Australian Prime Minister said here in Houston last year, affordable, reliable energy fuels enterprise and drives employment. It is the engine of economic development and wealth creation.
So today is a great opportunity for me to talk about oil and gas, something close to our hearts and our interests.
One area of the world where the nexus between growth and energy demand is apparent is in Asia, where Australia’s economy is benefiting from being close to Asia’s dynamic economies.
Australia’s trade and investment links with Asia are growing by the day and it’s important to highlight to our friends here in the US what we believe they mean.
Last year, for instance, Australia secured three ground breaking Free Trade Agreements with North Asia’s biggest economies: China, Japan and South Korea.
Those FTAs offer Australian businesses unprecedented access to the markets of China, Japan and Korea and that access includes entrée for foreign companies based in Australia.
Despite being a global trading nation, ten of our top 12 export markets are now in Asia. China is now our biggest export market and increasingly a major foreign investor.
Australia is Asia’s fifth largest economy; and with just 0.3 per cent of the world’s population we have the world’s 13th largest economy.
The Australian economy is now in its 24th year of consecutive growth.
Over the next four years the economy is expected to be the fastest growing in the developed world.
Investors rightly see Australia as an excellent place to invest but also as a base for expansion into Asia.
Open for Business
Australia doesn’t take anything for granted, especially following the global financial crisis of recent years.
Since coming to office, the Australian Government has made it clear that as a nation we are open for business. That’s our economic philosophy in a nutshell.
When the current Government was elected, our Prime Minister declared Australia “open for business”.
I know Governor Perry has declared “Texas is wide open for business.”, but as our Prime Minister said here in Texas last year, in the spirit of healthy competition, Australia will be hard to beat!
At the very heart of the Australian Government is a belief in self-reliance, for companies and individuals, and in the power of deregulation to free and inspire the energies of business.
We stress the importance of the private sector for creating new sources of economic growth, instead of debt-fuelled growth courtesy of the public purse.
And most of all we believe in backing our strengths and pursuing the things as a nation we are good at doing and do better than most.
One of those things, of course, is the production of energy.
A key lesson from recent history is the limits on government to fix the economy.
We’ve been working hard to implement policies that free the private sector to do it for us, generating jobs and prosperity.
That includes reducing government debt, abolishing Australia’s carbon and mining taxes and removing unnecessary regulation, which delays project approvals and increases costs.
We’ve made a commitment to cut the cost of business compliance by $1 billion per year. And we are focused on both red tape and green tape.
Under our Government, the Parliament now has specific days set aside for repealing laws rather than creating them, with the first of these alone removing 10,000 regulations in a single day.
We are reducing regulation because we don’t want government to hold back the investment our economy needs to prosper into the future.
Our role in the Asia Pacific region’s ongoing development has helped make our own economy one of the strongest and most resilient in the developed world.
Specifically, Australia is expected to realise average annual real GDP growth of 3 per cent between 2015 and 2019.
That’s the highest forecast growth rate among major advanced economies.
This positive outlook has a significant bearing on the performance of our energy sector and the interest foreign investors are showing in it.
Australia’s Energy Resources
Australia is a reliable and competitive supplier of a diverse range of energy commodities, including to the Asia Pacific region and its major economies.
These include oil and gas, coal as well as uranium.
Our oil and gas sector contributed about $27 billion to Australia’s merchandise exports in 2013.
One of Australia’s energy sector’s biggest achievements has been developing its LNG capacity.
Australia’s seven LNG projects now under construction represent around two-thirds of new global investment in LNG production.
As a result, Australia’s LNG export volumes are expected to more than triple from around 24 million tonnes currently to around 78 million tonnes by 2018-19.
Our export markets in LNG reflect in many ways our unique and growing ties with Asian markets.
Australia is the largest LNG supplier to Japan by quantity.
And Japan will soon become an exporter of Australian LNG when Inpex’s Ichthys project starts shipping LNG in 2017.
Korea produces very little gas domestically and is a major LNG importer.
We expect that Korea’s ASEAN imports will begin to be replaced by imports from Australia and North America.
In fact, forecasts indicate that by 2017 Korea will receive more than twenty-five per cent of its LNG imports from Australia.
We also expect growth in demand to increase from China in the near future. China’s share of global gas consumption is still small compared with the US, but it is interesting to note that China was responsible for more than half the growth in global gas consumption in 2013.
Looking to the future, China’s determination to improve the air quality of its major cities, and to supply gas for residential and commercial purposes, bodes well for future demand.
In fact, China is expected to double its share of the global LNG market from about 8 per cent to 16 per cent in 2019.
Importantly, the Australian Government is working with industry on a range of measures to ensure the competitiveness of Australia’s LNG projects.
By reducing costs, ensuring access to skilled labour, and increasing productivity and efficiency, we hope to create the right type of environment for investment and production.
These measures include the regulatory reform I touched on earlier, streamlining environmental approvals, workforce productivity measures, as well as a focus on skills and migration.
The current expansion of Australia’s LNG production capacity includes LNG projects in Queensland that are the first to be supplied predominantly by coal seam gas.
Exploration and development has seen proven and probable reserves increase more than eight fold in the last ten years to more than 40 trillion cubic feet.
Australia is also now looking to develop its other unconventional gas resources.
We have proven and probable reserves of coal seam gas that are estimated to last 130 years and sufficient shale reserves for domestic use that will last 400 years.
Shale gas has potential but much work is required to bring it into large-scale production, including the development of the necessary infrastructure.
Making sure that our critical industries have access to necessary roads, ports and rail track is one of our key national investment priorities.
A key part of Australia’s open for business approach is a strong belief in the power of foreign investment to deliver positive economic outcomes.
In short, foreign investment links a nation’s domestic economy to the dynamic forces at work in the international economy.
Foreign investment creates jobs, delivers vital new technologies and enhances the overall competitiveness of an economy through new systems and management ideas.
That has been the case in Australia’s experience, particularly for the development of the energy and resources sector.
Australia is one of the most open economies in the world when it comes to trade and investment.
The total stock of foreign investment in Australia was $2.6 trillion in June last year, or about 165 per cent of GDP.
And United States businesses are our largest grouping of investors across a range of industries, including energy.
Australia has abundant oil and gas resources for development, including for export. They provide significant opportunities to foreign investors.
Beyond the actual supply of energy resources, business in Australia operates in a stable environment, politically and socially, and is in close proximity to Asian markets.
At the same time, let’s not forget it’s also very easy to do business in Australia.
In the 2014 Index of Economic Freedom, Australia ranked third; Australia is also in the top five economies for easy access to credit; and we have an excellent system of corporate governance and a solid reputation for business efficiency.
The pipeline of new and planned petroleum and oil projects is also creating significant supply chain opportunities for investors in areas such as oil and gas operational support and maintenance services.
Right along the oil and gas value chain there are significant openings, and we welcome foreign investment along the chain.
In particular, foreign companies can take ownership from the reserves in the ground through to the production phase. That gives them the confidence they need to make the scale of investment and managerial commitment major energy projects require.
Investment in LNG
Take the development of Australia’s LNG sector as an example.
Foreign investment in the sector dates back to the 1980s with the establishment of the North West Shelf Project.
Since 1989 the $27 billion North West Shelf project has delivered more than 3000 LNG cargoes to international customers and currently supplies about 65 per cent of Western Australia's domestic gas market.
Today international investors represent the majority of firms involved in the current $190 billion wave of LNG investment in Australia.
Australia’s LNG export volumes are expected to more than triple by 2018-19.
This could see Australia overtake Qatar as the world’s largest LNG exporter and the center of LNG world exporting.
The depth of Australia’s LNG capacity is revealed by its unique range of production methods.
In fact Australia is the world’s only country that produces LNG that uses three LNG production models.
They include conventional offshore gas with onshore LNG production, floating LNG production, and coal seam gas-based LNG production.
Floating LNG and LNG production based on natural gas from coal seams may be the first developments of their type in the world.
Australia also has many planned or proposed projects beyond those under construction that we are hoping will be next wave of investment in LNG.
Around A$100 billion of potential additional LNG sector investment is proposed.
Of great interest is an emerging trend in the unconventional oil and gas sector that is attracting the interest of foreign investors in supporting shale oil and gas exploration.
International majors such as Total, ConocoPhillips, Chevron, Statoil, Apache Mitsubishi and Sasol have all made investment commitments to shale oil and gas projects in recent times.
And mid-sized North American players are also becoming increasingly active.
Investment in Oil
Although the oil price has declined significantly over the past six months, the search for new supplies continues apace around the world, including in Australia.
A key focus of the Australian Government is to encourage exploration in offshore frontier areas with the aim of discovering new oil and gas reserves.
In recent years there has been an explosion in exploration activity for oil in Australia. It reached a high of $1.2 billion in 2012-13.
One way the Australian Government encourages exploration is through the annual Acreage Release program.
The 2014 release comprised 30 areas across four basins in Commonwealth waters.
Successful foreign investors in the 2013 Acreage Release included Murphy Oil, Apache Corporation, Liberty Petroleum and Statoil.
I mentioned before the nexus between energy supply and economic growth.
That relationship is something the Australian Government is very aware of, and for good reason.
It is one of the most important things to get right when creating the conditions for business to flourish. Energy prices and availability affect all sectors of the economy.
The basic premise of our government’s policy is that reliable and affordable energy, used productively, supports business competitiveness, lowers the cost of living and grows export income.
We are currently looking at further ways in which the Australian Government can help the energy sector.
They include attracting energy resources investment; managing electricity price rises; increasing gas supply and improving market operation; and improving security, innovation and energy productivity.
The environmental approval process is a good example of how refining the rules and regulations governing the energy sector can encourage investors.
In February 2014, the Government announced a new streamlined approach to environmental approvals for offshore petroleum and greenhouse gas activity in Australian waters.
The idea here is to create a one-stop shop approval process that removes unnecessary duplication between different sets of laws.
At the same time, most of the state and territory governments are also undertaking regulatory reform to ensure continued investment in their oil and gas industries.
A culture of innovation has long been one of the key strengths of the global energy industry and Australia has been a solid contributor to this scientific and engineering progress.
More generally, Australia’s spending on research and development rose by 7.2 per cent per annum over the decade to 2011-12 to $32 billion. That’s more than twice the OECD average.
Innovation is also an important way to reduce costs and ensure the competitiveness of the sector.
This applies especially during the current period, when price fluctuations in energy commodities have put pressure on the bottom lines of many companies in the oil and gas sector.
One great benefit that foreign investors have in Australia is the opportunity to participate in our nation’s great culture of innovation at our research institutions, universities and Centres of Excellence.
I note for instance that Australia is home to Chevron’s second Global Technology Centre, IBM’s fifth oil and gas research centre, and Shell’s first floating LNG training and research facility.
Our national scientific and industrial research institute, the CSIRO, is developing new technologies for oil and gas exploration and production, with a focus on petroleum systems, oil recovery, flow assurance and unconventional gas.
And Queensland University of Technology’s Institute for Sustainable Resources has partnered with Schlumberger (Shlum-ber-jay) to establish a geotechnical laboratory.
All these initiatives demonstrate the Australian Government has a strong focus on increasing Australia’s competitiveness and making Australia more attractive for foreign investment.
The Houston Consulate-General
The Australian Government has great faith in the capacity of US firms to help develop our energy resources. More broadly, we see Texas and the surrounding region as a promising place to expand Australia’s trade and investment ties with the US.
As evidence of this, the Prime Minister announced during his visit to the US in the middle of last year that we would be opening a Consulate-General office in Houston.
I am happy to say this intent has now been fulfilled. As of the middle of this month, a new temporary office in Houston will open and by the middle of the year a permanent one.
It will be staffed by a Senior Trade Commissioner and Consul-General who will be the key contact for the Houston and Texas business community and for foreign investors interested in Australia.
The Consulate-General will also provide consular and passport services to the region, which includes Oklahoma, Louisiana, Arkansas and, of course, Texas.
The Australian Government is highly appreciative of the good work done by the Honorary Consul, Ms Nana Booker, over the years. The opening of the Consulate General is solid proof of the importance of her work and of our high regard for it.
2015 is looming as a big year for the Australian energy industry.
Gladstone LNG, Australia Pacific LNG and Gorgon LNG are all expected to come on line as producers of LNG.
But we also look to the future and to newer sources of energy. Foreign partners will play a critical role in helping us to achieve that vision.
The revolution in shale oil and gas in recent years has highlighted to us all the importance of the price and supply of energy.
They affect growth and jobs and overall prosperity in a fundamental way.
With the seventh largest deposits of shale resources in the world, Australia is aware of the potential of unconventional sources of gas and oil.
Developing that potential highlights the importance of creating the right type of business environment for the industry to prosper.
We have a lot of expertise already. BHP Billiton, for instance, is one of the largest foreign investors in US shale oil. But we aim to develop our capacity even further.
Australia has the potential to become a major player in shale gas, especially in the Cooper Basin.
And through foreign investments and joint ventures we hope you can join us in developing these energy resources.
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