Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Minister for Defence) Share this | Hansard source

Mr Deputy Speaker, I know that you will agree that former resources spokesmen do not grow old; they just grow wiser. On that basis I am not surprised to see the member for Batman making such a substantial and significant contribution. I know the minister at the table, the Minister for Industry, Tourism and Resources, Mr Macfarlane, will not be surprised to see me here at least attempting to make a substantial contribution. I note that the minister at the table is not yet a former resources spokesman, so I am not sure whether my remarks about growing wiser apply to him, but we will give him the benefit of the doubt.

I maintain a very deep-seated interest in matters relating to our resources sector. Also, in my new shadow portfolio of defence I take a very keen interest in the stability of our region, particularly the parts of the region closest to home. Nothing can be more important to Australia’s national security than a stable East Timor—of course, that applies to all of that region.

The Offshore Petroleum Amendment (Greater Sunrise) Bill 2007 is hopefully about underpinning and ensuring a stable East Timor, while at the same time exploiting every benefit we can from our very generous endowment of natural resources—in this case, our plentiful supplies of natural gas, at last count about 150 trillion cubic feet. So I am very pleased to be speaking to the bill and very pleased to support the bill.

We have been a long time getting here—a long time working out a fair deal both for our own nation-state and for the East Timorese. Of course, when we look at that problem we do try to get the right balance between maximising the benefit to our own country and economy and making sure that we do all we can to get the East Timorese out of impoverishment by getting that economy bumping along, which the member for Batman spent some time discussing. Hopefully, this far down the path we have that balance right. It has not been easy.

As members of the House know, the boundary between East Timor and Australia on these matters is determined by our continental shelf, which means that our legal boundary extends well beyond our northern shoreline. There are those who think that these days that is not fair and that the boundary should be equidistant from the two nation states. There were those who were pushing very hard for that to be the case. There were also those who were very disappointed at Australia’s decision to withdraw from the jurisdiction of the International Court of Justice, which would have been the independent arbiter on these issues. Thankfully, we are past arguing that. I acknowledge some would not have been happy with that approach. I also make the point that I was not always happy with the government’s approach to those negotiations at that time. It is well recorded that Minister Downer in particular took quite an aggressive approach towards the East Timorese when dealing with those issues.

Hopefully, we can now settle down to the approach we have before us, which is dealing with Sunrise as it sits outside the JPDA, and to the day the unitisation agreement—if I understand the technical aspects—deals not so much with the boundaries but with how you agree on what part of the gas lies where at any particular time, to oversimplify the issue. Hopefully, this is an agreement which, once sealed, will get the right balance between Australia’s economic and strategic interests and the future development and security of East Timor.

Those who were arguing that we should go to an equidistant line, which would have given the East Timorese much more of the resource than we would have secured for ourselves, missed a couple of points. One is the potential implications that has for the resource in terms of Indonesia’s sovereign rights over part of the Greater Sunrise field. Another is that it ignores the fact that, while it would have meant more revenue for the East Timorese, we would have had less control over how that money is spent in East Timor. I do not think it is a criticism of East Timor to say that it is important that Australia, through the allocation of funds to that country, maintains some control over where that money is spent. It has been a politically unstable country for a long time and that instability largely continues. So there is an argument that it is better for Australia to be collecting resource revenue and extending it back to the East Timorese in the form of foreign aid. I think that is an important point to make. These debates are never as easy as: ‘The line should be here and East Timor should be getting more of the resource.’ It has not been simple throughout the course of this debate and will never be simple.

You have to consider the fact, when you are talking about the economics of this issue, that since 1999 we have spent about $3 billion securing East Timor in a military sense. That is another $3 billion you may or may not have to spend in the future if East Timor is standing on its own two feet, enjoys a stable democracy et cetera. So there are always two sides to the equation when dealing with these very complex matters.

I want to pick up a point raised by the member for Batman: these things all have knock-on effects in our resources sector, and we have to look at them in a macro sense. I am delighted the minister is here, because I noticed that Allan Wood in the Australian this morning talked about the $25 billion gas contract to China, which was signed some years ago now. The minister will recall that I very cautiously criticised that contract at the time, and there is a direct link between that and the matter before us. I argued at the time that, while it was certainly Australia’s biggest trade contract in dollar terms, we were effectively giving the gas away and that all the forecasts for commodity prices generally, particularly energy, were that prices would be rising. Quite frankly, I thought it was a bit of a dud deal for Australia and said so at the time. I was roundly criticised by, I have to say, a few people on my own side, not only by members on the government side, and I found no sympathy in the journalists covering the story at the time.

It is history now that the government won that debate and were able to get away with claiming that it was a great thing for Australia’s economy, and the Prime Minister, the Minister for Industry, Tourism and Resources and the Minister for Trade were all falling over one another to claim credit for the deal. But I think that just last year, when things started to turn sour and people started to realise that it might not have been such a crash-hot deal after all, they were trying to deny having any real or direct involvement in the negotiation of the price. I said at that time that my view and my intelligence was that the Prime Minister went to Beijing and talked to Hu Jintao, the leader in China at the time, and Hu Jintao said, ‘Well, you’ll just have to go back and tell your venture partners that they have to reduce their price,’ and I think that is exactly what the Prime Minister did. It is history now and I think it is an almost uncontested fact that the price was locked in too low, to the great detriment of the Australian economy.

I made two additional points at that time. One was that when other contracts, such as that with Japan, came up for renewal, the Japanese would be naturally asking for the same sort of deal that the Chinese had secured, and that deal was of course at a unit price much lower than Japan was paying at the time. But the other point is more directly linked to what I am now arguing in the bill before us: if you drive the price of LNG down by entering into a deal such as the $25 billion deal with China, for political purposes, for political advantage, it will have knock-on effects such as those with Japan, but it will also have a knock-on effect on the viability of some of our other fields. The member for Batman made the point that Greater Sunrise is still not much more than a proposal, which has been partly held back by the matter we are dealing with today—that is, the agreement on the sharing of resources—and also held back by the sheer economics of the project. If you drive LNG prices down by entering into a deal with China, which is not in Australia’s best interest in any case, you undermine the economics in future fields—you undermine the viability of developing Greater Sunrise. The minister is shaking his head. Let me say it again: if you take an action that drives down LNG prices or puts a brake on the growth in LNG prices, you are obviously playing a role in reducing the price of LNG and therefore you are driving downwards the economics of developing future fields. That is just common sense. It is a matter of fact. That is an important point which is directly linked to the bill before us.

The opposition are committed to a fair outcome. We believe, just as with the original proposals in the original Joint Petroleum Development Area, that this is a fair and balanced outcome. We do not believe the government has handled the issue well on all occasions. In fact, I think the government came very close on a number of occasions to ensuring that this project would never go ahead, or at least that it would not go ahead in the immediate future—and when I say immediate future, in resources terms that is the next 10, 20 or even 30 years—which would have cost both the Australian economy and the East Timorese economy. It would have stalled our attempts to help lift that young country out of its impoverished state and, therefore, undermined the social structure of East Timor. That in turn would have undermined the national security and stability in the region, which in turn has ramifications for our own national security. The government have bumbled along much of the way, but I express the hope that they have it right this time around and that we have an agreement which is to the satisfaction of both Australia and our close friends in East Timor. That is not to say that we are close to realising this project. That is yet to be known.

The other point is that when you force the economics of the project you put greater pressure on the venture partners to consider LNG offshore rather than onshore. If you force down the price, they will work even harder at improving their margins on the development. That is one of the things that forced Shell, in particular, to talk about an LNG platform offshore rather than an LNG facility onshore in Darwin. If that occurs, that will be a great loss to the Australian economy. It will mean we will not secure the jobs and money we would have secured from the onshore project. But it is not just the jobs and the facilities onshore near Darwin; it is the additional capacity it gives us to pipe that gas further south, particularly to the south-eastern corner of the country. One of the great frustrations about our great endowment of gas in this country is that so much of it exists in remote north and north-west Australia, too remote from the main markets in New South Wales and Victoria. But bringing Sunrise onshore gives us another choice above bringing natural gas from the North West Shelf to those markets. It seems the PNG gas pipeline is now a thing of the past. So Greater Sunrise is probably our greatest alternative to bringing natural gas finally to those great markets in the eastern states of Australia.

This has been a very important negotiating period. It is about international relations, national security, Australia’s economic wealth and East Timor’s economic wealth—bringing them out of their impoverished state so that they can stabilise in future as a longstanding democracy.

Labor, while making criticisms about the process along the way, are very pleased to support the bill. We keep our fingers crossed that the outcome will be an effective one and that, at last, some time in the not too distant future we will get a development which comes onshore to Australia, fuelling Australia’s economic development. But we hope also that we will have created a deal which is overwhelmingly in the interest of the East Timorese people and, on that basis, will make a great contribution to the long-term stability and wealth of that nation.

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