Presentation to the Melbourne Mining Club · Presentation to the Melbourne Mining Club Oil and Gas...

MelbourneMelbourne Mining ClubMining Club9th October 20039th October 2003

Presentation to thePresentation to theMelbourne Mining ClubMelbourne Mining Club

Oil and Gas in AustraliaOil and Gas in Australia

John AkehurstJohn Akehurst

Thursday, 9 October 2003Thursday, 9 October 2003


World Reserves ≡ 40 years productionOECD Reserves ≡ 11 years productionAustralia’s own reserves ≡ 10 years own production

Location of Global Proved Oil ReservesLocation of Global Proved Oil Reserves

North America

64.4

South & Central America

95.2Africa

74.8

Europe

19.1

Middle East

683.6

Former USSR

65.3

Asia Pacific

44.0

Australia

2.9

Thousand Million Barrelsas at end of 2000


Oil Production by RegionOil Production by Region

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

2001

80

70

60

50

40

30

20

10

0

80

70

60

50

40

30

20

10

0

Oil production was broadly flat in 2001 compared with the previous year. Strong growth in the Former Soviet Union was offset by a decline in OPEC output.

Million barrels daily


History of Crude Oil PricesHistory of Crude Oil Prices

Money of the day $ 2001

1861

-69

1880

-89

1900

-09

1920

-29

1940

-49

1870

-79

1890

-99

2002

-03

1990

-20

01

1980

-89

1970

-79

1960

-69

1910

-19

1930

-39

1950

-59

0

80

70

60

50

40

30

20

10

100

90

US dollars per barrel

Iraq

inva

deKu

wai

t

Irani

anR

evol

utio

n

Yom

Kip

pur W

ar

Penn

sylv

ania

O

il B

oom


0

100

200

300

400

500

600

700

800

1975 1980 1985 1990 1995 2000 2005 2010

Year

Pro

duct

ion

('000

bbl

/d)

Gippsland

Total Australia

Actual Forecast

209 kb/d

313 kb/d

453 kb/d

724 kb/d

10%

50%

90%

Source: APPEA, Geoscience Australia

Australian Crude Oil and Condensate ProductionAustralian Crude Oil and Condensate Production


01020

3040

50

6070

1990 1995 2000 2005 2010Year Ending 30 June

Per

cent

Source: ABARE Energy Projections, Oct 2001, GeoScience Australia

Australian Crude Oil and Petroleum Products ImportedAustralian Crude Oil and Petroleum Products Imported

Economic Economic ImplicationsImplicationsofof Higher Oil Imports Higher Oil Imports•• Balance of PaymentsBalance of Payments::

Surplus/(Deficit) $billion1999/2000 0.122001/2002 1.252004/2005 (5.60)2009/2010 (7.60)

•• Energy SecurityEnergy Security::

Increased reliance of less stable oilexporters - Middle East, Indonesia, etc.

•• Sectoral Impacts - JobsSectoral Impacts - Jobs::

Every 100 jobs created (or lost) in WAoil and gas industry leads to ~300 jobscreated (or lost) elsewhere in WA.

•• Government RevenuesGovernment Revenues::

Next slide.


Source: APPEA, Budget Papers

Commonwealth Tax Collections from theCommonwealth Tax Collections from theUpstream Petroleum IndustryUpstream Petroleum Industry

Royalties Production Excise PRRT Income Tax

0

1

2

3

4

5

6

1988

1990

1992

1994

1996

1998

2000

Year Ending 30 June

$ B

illion

1989

1991

1993

1995

1997

1999

2001


So What can be Done?So What can be Done?

• Increase Exploration.

• Increase Recovery from Existing Resources.

• Increase Fuel Substitution - to gas and others.

• Reduce Liquid Fuel Demand - technology.

but

There is little chance to return to self sufficiency


Australian Petroleum ExplorationAustralian Petroleum Exploration

• Australia has relatively low oil prospectivity compared with other parts of the world.

• Fields are generally smaller and technically more challenging - ie expensive and riskier - heavy oil, deep water, etc.

• Other countries have more attractive terms for frontier acreage.


Middle East1,974 Tcf

Former USSR1,982 Tcf

Europe172 Tcf

Sth & CentAmerica253 Tcf

North America267 Tcf

Africa395 Tcf

Asia Pacific433 Tcf

3% 5% 5% 7% 8% 36% 36%

Proved Gas Reserves Proved Gas Reserves -- Global Picture (2001)Global Picture (2001)


West CoastPopulation ~ 1.9 million

East StatesPopulation ~ 16.0 million

Total gas reservesTotal gas reserves0.8% of World Reserves0.8% of World Reserves

Australia’s Gas Resources and Population DensityAustralia’s Gas Resources and Population Density

Central StatesPopulation ~ 1.7 million

Australia uses Australia uses ~1 Tcf/year~1 Tcf/year

Western Australia

Northern Territory

South Australia

Queensland

New South Wales

Victoria

SYDNEYCANBERRA

MELBOURNE

PERTH

BRISBANE

ADELAIDE

DARWIN

HOBART

Existing PipelineProposed Pipeline

Greater North West Shelf

75 Tcf

Browse Basin30 Tcf

Bonaparte22 Tcf

Gippsland/Bass/Otway8 Tcf

Cooper/Eromanga5 Tcf

PNG10 Tcf


Fuel Substitution with GasFuel Substitution with Gas

• Create a new source of automotive fuels - gas-to-liquids.– But marginal economics where gas has market value.

• Increase balance of payments and revenues by reducing oil imports and increasing gas exports (LNG).

• Increase security of supply.

• Reduce GHG emissions - coal to gas and oil to gas.


Gas to LiquidsGas to Liquids

Gas to Liquids offers the opportunity to tap almost unlimited maGas to Liquids offers the opportunity to tap almost unlimited markets when rkets when compared to LNG alonecompared to LNG alone

Middle Distillates3,000 MtpaLNG

100 MtpaMethanol40 Mtpa

Gas intake600 MMscf/day5 Tcf/project life

6 Mtpa 4 Mtpa3 Mtpa

4%20%

0.1%


Gas to LiquidsGas to Liquids

GTL can be a key enabler for the future development ofGTL can be a key enabler for the future development ofAustralia’s gas resourcesAustralia’s gas resources

• Abundant remote gas reserves• Stable investment climate• Complementary to LNG – Strategic

Diversification • Growing demand for clean fuels

Strategic Drivers

• Capital costs of construction• Gas into plant price- offshore remote gas

is an economic challenge• Fiscal regime• Local synergies (infrastructure, power,

water)

Economic hurdles


East Asia LNG Supply/DemandEast Asia LNG Supply/Demand

Source: CERA - December 2002

0

100

200

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

LNG

Dem

and

(Milli

on T

onne

s)

Contestable Demand

Contracted Supply

50

150

ChinaTaiwanKoreaJapan

DemandChinaTaiwanKoreaJapan

Supply

2002 Suppliers Commitments Projects

LNG

Supp

ly (M

illion

Ton

nes)

Arun/Butang-Indonesia

Das Island - Abu Dhabi Lumut - Brunei

Malaysia LNG

NWS - Australia

Ras Gas - Qatar

Iran

NWS - Australia

Oman LNG

QatargasRasgas - Qatar

Sunrise - Australia

Qatar - Other

Kenai - Alaska

Oman LNG

Arun/Botang - Indonesia

Lumut - Brunei

Sakhalin - Russia

Tangguh - Indonesia

Yemen LNG

Malaysia LNG

Qatargas

Gorgon - Australia

Bayu Undan NWS - AustraliaTangguh - Indonesia


Regional ResourcesRegional Resources

AustraliaNWSV

Badak

BruneiLumutArun

OmanQalhat

QatarQatargas& RasGas

Abu DhabiDas Island

MalaysiaMLNG I - III

Tangguh

RussiaSakhalin II

AlaskaKenai

Japa

n

Legend

ExistingNear Future

Suppliers:

South Korea

TaiwanSE China

India

Indonesia

Sunrise

YemenBalhaf

IranSouth Pars

ExistingNear Future

Markets:Bayu Undan

Gorgon


Australia’s Gas Resource OwnershipAustralia’s Gas Resource Ownership

NWS Uncontracted Greater GorgonBrecknock - Scott ReefWA-267-P Scarborough SunriseBayu Undan

Che

vron

Texa

co

Exx

onM

obil

BHPB BP

MIM

I

Trilli

on C

ubic

Fee

t (Tc

f)

She

ll

Woo

dsid

e

Con

ocoP

hillip

s0

5

10

15

20

25


Competing Uncommitted Reserves Interests of MajorsCompeting Uncommitted Reserves Interests of Majors

0

4

8

12

16

20

24

NW

S E

xpan

sion

Sun

rise

FLN

G

Gor

gon

Bay

u U

ndan

Bro

wse

Bon

tang

Tang

guh

Tiga

(Bin

tulu

)

Qal

hat (

Om

an)

Cam

isea

(Per

u)

Ras

Gas

Qat

arG

as

Sak

halin

I

Sakh

alin

II

P50

Res

erve

s -T

rillio

n C

ubic

Fee

tShell ExxonMobil ChevronTexaco BP Woodside ConocoPhillips Other


World Emissions by RegionWorld Emissions by Region

AustraliaAustralia(1.1%)(1.1%)≈ 500 Mt

JapanJapan(3.7%)(3.7%)

Former Soviet UnionFormer Soviet Union(13.7%)(13.7%)EuropeEurope

(27.7%)(27.7%)CanadaCanada(2.3%)(2.3%)

OtherOtherDeveloping countriesDeveloping countries

(8.9%)(8.9%)

USAUSA(30.3%)(30.3%)

China, India &China, India &Developing AsiaDeveloping Asia

(12.2%)(12.2%)

Source: World Resources Institute, 1999

Has announcedHas announcedintention to ratify Kyotointention to ratify Kyoto


Emission Outcomes without developing CountriesEmission Outcomes without developing Countries

Source: Australian Commodities March 2002

0

5

10

15

20

25

30

35

40

45

1990 1995 2000 2005 2010 2015

Global

Developing Countries

Gt o

f car

bon

diox

ide

equi

vale

nt

Kyoto Target Countries

• Developing nations (no target set) share of global emissions in 2010 50% (18Gt CO2-e)

• Australian decrease on business-as-usual emissions required to meet 108% of 1990. - 35% (.3Gt CO2-e)(excluding land-use change etc)

• Current Australian % of World total 1.5%


Australia ProjectionsAustralia Projections

1990 to 2010 Projections:1990 to 2010 Projections:• 116% accounting for land use changes and forestry.

• 130% without accounting for land use changes.

• 144% if no abatement and business as usual.


Greenhouse GasesGreenhouse Gases

• Australia/Global have accepted the need to reduce Greenhouse Gas emissions.

• Australia’s major emitters have voluntarily reduced emissions intensity significantly between 1996 and 2002.

• Need to approach Greenhouse Gas abatement with a national and international perspective.

• Need to address the flaws in Kyoto protocol.

• Need to develop a longer term plan for addressing GHG to improve business investment certainty.


Lifecycle Emissions ComparisonLifecycle Emissions Comparison

0

100

200

300

400

500

600

700

800

900

1000

1100

Coal Oil LNG

Inside Australia Inside JapanK

g C

oK

g C

o 22-- e

/Mw

h el

ectri

city

gen

erat

ed.

e/M

wh

elec

trici

ty g

ener

ated

.

Source: CSIROSource: CSIRONote: oil emissions calculated using Middle Eastern oil (AustraNote: oil emissions calculated using Middle Eastern oil (Australian oil is expected to produce slightly lower COlian oil is expected to produce slightly lower CO22 emissions)emissions)


Clean Energy ExportsClean Energy Exports

Kyoto Protocol has no mechanism to recognise the global environmental benefits of Clean Energy Exports such as LNG.

Limitations of Kyoto ProtocolLimitations of Kyoto Protocol• Emissions inventories are confined within country boundaries.• Does not accommodate international energy movements.• Only developed countries have Assigned Amounts.

Implications for AustraliaImplications for Australia• Australia bears the emissions burden, while contributing to a

global solution.• Kyoto compliance leads to Australia de-industrialisation.


Impact of Kyoto on AustraliaImpact of Kyoto on Australia

• As a major exporter, including of energy, economic impact on Australia is likely to be greater than other OECD countries.

• Vision of further value added to resources within Australia requires energy (= increased emissions).

• Planned population growth will make the ceilings more punitive.

• While targets may be achievable by 2012, the next period (2013-2025) will be far more challenging.


SummarySummary• Australia’s oil reserves replacement and production will fall drastically over the

rest of the decade.

• Increased imports will effect balance of payments, jobs and the security of our energy oil supply.

• We need to incentivise oil explorers/developers plus increase use of gas as a substitute fuel.

• Australia is blessed with very large gas reserves mainly the North West of Australia.

• Increased gas (LNG) exports will help the balance of payments and job creation.

• Gas to liquid research could lead to an alternative source of transportation fuels, but economics are difficult

• Substitution of coal and oil with gas in power stations will reduce GHG emissions.

• Recognition of transboundary energy movements and involvement ofDeveloping Nations is required to create a genuine global solution.

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