I do applaud Senator Hanson for bringing forward the Offshore Petroleum and Greenhouse Gas Storage Amendment (Domestic Reserve) Bill 2023. I think it’s a very important issue and one that should be looked at again in this country. There is no doubt that we’ve all come to the conclusion that the Western Australian gas reservation scheme is a much better standard than how we’ve developed our gas resources in other parts of the country. I make the point upfront that effectively it appears to me that Senator Hanson is seeking to use that as an example here with her bill, which also requires effectively the reservation of up to 15 per cent, just like the Western Australian model. Of course, that already happens for gas, including gas in Commonwealth waters off the Western Australian coast. Western Australia enforce their policy through the fact that that gas almost invariably, with one exception, has to come onshore to the Western Australian coast and therefore this 15 per cent reservation can be applied there.
When I read the bill, it was a little unclear to me exactly how Senator Hanson’s bill would interface with the Western Australian standard. I realise there’s a provision in the bill that would allow the Commonwealth to ‘gift’, if you like—that’s my word, not the bill’s word—the 15 per cent to a state jurisdiction, but it’s not spelt out whether exactly that would happen in the case of Western Australia or whether it would be left to the discretion of the Commonwealth government. I think that creates a bit of uncertainty.
I also think we need to be very careful in the way we design a reservation scheme. When I was resources minister we signed, for the first time, a memorandum of understanding with a territory government to have a reservation scheme of some kind in regard to the Beetaloo basin. I haven’t heard much from the current government about developments on that, but I do hope that, if the Beetaloo basin ever does come into production, the MOU is honoured and we see a cooperative agreement between the Commonwealth and, in this case, a territory jurisdiction to ensure that some portion of that gas is left for Australian uses and that not all of the gas is exported. It is very important to get these settings right, because developing our oil and gas reserves requires billions upon billions of dollars of capital. There is a great risk that, if we were to act in an injudicious way, people wouldn’t invest in our country.
I don’t quite agree with Senator Hanson that it would be best for us to move to a Norwegian or Middle Eastern model, where the state owned gas or oil companies are developing resources. That traditionally was the way in Norway. Norway’s fields are very different to our own. They’re very liquid-rich, very lucrative. Basically, a monkey’s uncle could drill in those fields and still make money. The Australian oil and gas fields are much riskier, much more difficult. We saw that recently with the failed—or what appears to be failed—investment of Shell in their FPSO, their floating offshore LNG production vessel. It’s had huge cost blowouts, and it looks like it will not make them a profit over time.
So there is risk here. If we were, as a government, to make these investments it could be the taxpayer, ultimately, that makes those losses, not an overseas company. I actually think it’s better that we allow companies, which have much greater experience and institutional knowledge about developing these resources, to take those risks—that we allow shareholders of those companies to take those risks. They may make money, and, if so, they deserve that reward because they’ve taken the risk. In a case like Shell’s FPSO, which may lose money, at least the taxpayer is not on the hook for that.
What we should do, of course, given that these resources are the Australian people’s resources, is to make sure there’s a significant return of any profitable investments to the Australian taxpayer. We do that principally through the existing Petroleum Resource Rent Tax arrangements, which have raised a lot of money for Australia over time. There’s a lot of controversy about those right now, but over the past decade those arrangements have attracted $200 billion of investment in Australian oil and gas, and that’s been of great benefit to the broader Australian economy. There have been lots and lots of jobs and business created by that investment, obviously, as those LNG projects have been built, and now they’re really delivering revenue as well. Gas is now our third-biggest export, behind coal and iron ore. It’s worth between $70 billion and $80 billion a year. It’s very significant for our country. I’m sure that over time it will also lead to higher returns. With the Petroleum Resources Rent Tax being a superprofits-type tax, it takes time, given those large investments, for those projects to become profitable and the taxes to be returned to the Australian people.
In saying all of that, I do think we need to look again. It was probably regrettable, in the case of the Queensland LNG investments—which were onshore and wouldn’t be captured by this bill, admittedly—that we didn’t reserve any of that gas for Australia. All of that effectively was sent offshore. Given the shortages we’re seeing on the east coast now, perhaps a different decision should have been taken, principally by the Queensland government—they’re their resources, not the Commonwealth’s. That’s something to reflect upon.
I listened to Senator Grogan’s speech to the bill earlier, and I wasn’t sure that she was correct about this bill only applying to Queensland, New South Wales, South Australia and Victoria, as I think she said. I didn’t see that in the bill myself. I don’t think there’s any geographic restriction. As I mentioned, WA is already effectively taken care of by its state scheme, so, at best, this bill would probably be inconsequential to those arrangements, and that is where most oil and gas from Commonwealth waters now comes from. The Bass Strait is another area which significant amounts of gas still come from. It’s rather dry now, from an oil perspective. However, those fields are already 100 per cent domestic and always have been. They were effectively built and developed to help support the Victorian manufacturing industry and still largely serve Australian needs. This bill, again, would at best be ineffective there. The joint venture there that existed between BHP and Esso would still be easily meeting a 15 per cent reserve requirement and well above that. There aren’t significant gas reserves that have been developed in New South Wales. There’s one very controversial one in PEP-11, but it could still be many, many years away. Obviously, developments off the coast of Queensland are not going to happen, with the Great Barrier Reef being there. There won’t be oil and gas production there.
That leaves the Northern Territory, which does have significant oil and gas reserves to the north. This bill notionally would potentially apply there. I would suggest, though, that, if that’s the only area we’re targeting, we could probably do something a little bit more targeted than the broad-brush range of this bill, which I think raises the particular risks that I mentioned of deterring and not attracting investment. I would recommend the kind of model that is being developed through the MOU I developed with the Northern Territory. It’s something we should probably cooperate with the Northern Territory on, especially with the development of the Middle Arm proposal. We could probably do that on an intergovernmental level without the need for this kind of nationally scoped legislation, which may have inadvertent consequences for areas like Western Australia and Victoria, where there’s not really a reservation issue or problem.
I’ve had some brief discussions with Senator Hanson and realise she has a different view, but I do have some concerns that this bill could have a retrospective impact. I wasn’t able to listen to Senator Hanson’s entire speech, but, to me, the explanatory memorandum of the bill doesn’t rule out the bill potentially applying to existing licences. The explanatory memorandum says:
If the Bill passed into law petroleum production licensees would be given 12 months to enter into a domestic reserve agreement with the Commonwealth for 15% of their exports and satisfy the condition of their licence.
To me, that does seem to capture existing licences, because they’d have 12 months—it says people with production licences would have 12 months to enter such agreements. I don’t support any retrospective treatment of fields that are already producing. Those investors have come here with certain rules of the game, which did not include a reserve requirement. They’ve spent billions upon billions of dollars. I will give the example, which is the one exception I mentioned earlier, of the Ichthys field, off the coast of Western Australia. That gas does not come onto the shore of Western Australia; it goes into Darwin. It was developed primarily by a Japanese company, INPEX. That doesn’t get the WA 15 per cent treatment. The project was roughly $40 billion of expenditure as a whole. It’s the biggest Japanese investment in history outside of Japan. I really don’t like the idea of governments after the fact—after attracting that investment and after laying out the rules of the game for those investors—coming along and saying, ‘Hey, we’re going to change the rules now, and we want a bit of that production that we otherwise signed off for you to have.’ I think that’s just wrong. It’s ethically wrong to act in such a way. It’s duplicitous, if nothing else, and, as usual, duplicity has perverse outcomes. Going forward, people would be less attracted to come to this country and invest in our nation if we were to include such requirements.
I would suggest to Senator Hanson and other senators that maybe this sort of issue needs to go to a committee of some kind to look more deeply into these issues and make sure things like that are properly captured in any particular legislation that comes before this place. I do want to see further action here. Putting aside questions around how much oil and gas should stay in this country, the broader question is: are we going to develop oil and gas at all? We’ve actually got to get that first.
I was a little concerned yesterday when Senator Pocock asked an excellent question in question time about the fact that most of us would have noticed when we drive past the petrol station that they’re all above $2 now. Some people are seeing $2.30 or $2.40 for diesel. I don’t know how people are affording to pay to fill up their tanks. It’d be well over $100 for almost everybody. If you have a big car, it’d be over 200 bucks. It’s crushing people. In response to that question, all the minister could talk about was electric cars. I checked this morning because I thought it was a bit strange. The cheapest electric car in this country is the Chinese-made BYD Dolphin, and it costs $38,000. How is a family who can’t afford 100 bucks to fill up their tank going to afford a $38,000 car? That’s the government’s solution right now. You’re struggling to pay for petrol? Go buy an electric car. It’s ridiculous.
It shows how out of touch these people are. They don’t understand average Australian families. They’re already struggling to keep their home. They’re up to their eyeballs in debt already. They can’t go get another loan or another lease for a $38,000 car. This is absurd. That’s the cheapest. That’s the entry-level electric car.
Senator Hanson: Yes, and a battery that catches fire.
Senator CANAVAN: Don’t get me started on that, Senator Hanson; I’ve only got three minutes left! But I’ll quickly detour and say the other problem is that these electric cars don’t even help the environment. They create 70 per cent more carbon emissions than the construction of an internal combustion vehicle. Yes, over time, potentially they can become carbon neutral or carbon positive, but in our electricity system, being coal dominated, it would take an average Australian eight years to become carbon neutral—and then the battery would conk after that and you’d have to go get a new battery and start the process all over again. This is ridiculous. It certainly doesn’t help the environment, but, more to the point, my major issue for Australians is that it doesn’t help them with the cost of living.
The reason why your petrol prices are going up is because the rest of the developed world has taken a leave pass on developing their own energy resources. We now have given the control of our energy prices to the authoritarian regimes of Saudi Arabia and Russia, and they are determining the world price. Over the past few months, they have pulled back on their production and—surprise, surprise—global oil prices are back over $90 a barrel, with some suggesting they will get back over the $100-a-barrel level. That’s why you’re paying more for petrol. As long as we do not develop our own resources, we will be dependent on others. As long as we do not encourage oil and gas production in this country, we will pay more for petrol because the other petrol produces, like Saudi Arabia and Russia, like the prices being high because they’re massive exporters of oil and gas, and they will keep those prices high if we let them.
Once again, I applaud Senator Hanson for what she’s brought forward here today, but the bigger issue is: are we going to gift our energy dependence to authoritarian regimes when we have so many resources here in this country ourselves? There is no reason we cannot become self-sufficient in oil and gas again. Just 20 years ago, we were. We had the Bass Strait going gangbusters. Senator Hanson is exactly right about the oil and gas resources in this country; there are enormous reserves. But we need to encourage people to invest in it. We need to support those businesses who risk billions of dollars of capital to do so. It would be nice to hear the government in their response to this bill say they do support oil and gas jobs, they do want to see Australia become energy-independent again and aren’t going to obsessively put all our eggs in one basket and rely on Australians having to spend thousands of dollars on foreign-made electric cars.
