Pauline Hanson (Queensland, Pauline Hanson's One Nation Party) Share this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to table an explanatory memorandum relating to the bill.

Leave granted.

I table an explanatory memorandum, and I seek leave to have the second reading speech incorporated in Hansard.

Leave is granted.

The speech read as follows—

Today I introduce the Offshore Petroleum and Greenhouse Gas Storage Amendment (Domestic Reserve) Bill 2023, because Australians should benefit from Australia's vast and valuable petroleum resources. These petroleum resources include oil, natural gas, and other valuable hydrocarbons like bitumen.

The purpose of my Bill is to introduce a petroleum reserve in Australia's offshore waters, by amending the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGGS Act).

This Bill is different from my earlier OPGGS Amendment (Benefit to Australia) Bill 2020 referred on 4 February 2021 to the Senate Economics Legislation Committee for inquiry and reported on in March 2021.

With that Bill, I sought to broaden the object clause of the OPGGS Act to make the 'benefit of the Australian community' a guiding principle in the interpretation of that legislation.

When the Senate failed to support making the 'benefit of the Australian community' a guiding principle for managing our offshore petroleum reserves, foreign-owned transnational oil and gas companies notched up another win against the people of Australia. If the 'benefit of the Australian community' had been adopted as a guiding principle in the OPGGS Act, then long held leases would now be in production providing more gas to Australia.

Australia has abundant petroleum resources. During 2020 Australia was the seventh largest gas producer in the world, largely based on new projects located off the coast of Western Australia. These projects have a 40-year life, and possibly double that time if nearby leases are put into production.

By 2022 Australia was the world's top exporter of liquefied natural gasbut the large amount of gas being exported is causing a domestic gas shortage. How is it possible for the world's largest exporter of gas to be short of gas at home?

Firstly, the state of Western Australia is not short of gas. The state government encouraged foreign-owned multinational oil and gas companies to invest as early as 1977 by entering long term contracts to take a specific amount of gas, and later in 2006 it placed a 15% domestic gas reserve policy on Commonwealth gas brought onshore to WA for processing.

We now know that 93% of all of Australia's known reserves of natural gas are in the North West Shelf off Western Australia and part of the Northern Territory.

Is it fair that 93% of Commonwealth-owned natural gas should benefit just 10% of Australia's population? My view is no. Western Australia receives a huge benefit without compensating the other states because of the passage of the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Act 2018.

The Commonwealth government might argue the Petroleum Resource Rent Tax Act 1987 gets payment for the gas, but that Act fails on every level including revenue. Labor, the authors of this legislation, ensured the law was poorly designed and no government has had the courage to change it since.

There is an energy crisis in eastern Australia where most Australians live. There are few long-term supply contracts, and no domestic offshore gas reserve policy on Commonwealth-owned gas, because less than 7% of the known gas reserves are in eastern Australia.

It is no surprise the Labor government of Western Australia supports a national gas reserve offshore from the eastern states because WA has access to more gas than they could ever need.

The left might tell you that fossil fuels are on the way out, but the evidence is otherwise. Gas is increasingly needed to backup renewables as coal fired power stations are forced out of the electricity generation business.

Gas shortages are causing electricity prices on the east coast to skyrocket.

The electricity price in the eastern states is set through a five-minute bidding process where the price offered by gas generators often sets the price for the purchase of wind and solar generated electricity one day in four. A domestic gas reserve will increase the supply of gas and lower the price of electricity directly and indirectly through the National Electricity Rules.

The Australian Energy Market Operator (AEMO) knows the generators game the system, driving up the price of electricity, and the government is doing nothing about it. The problem is beyond the scope the Bill I am introducing.

Australia is the only exporter of gas in the world to suffer domestic gas shortages. All Australians own the gas in offshore Commonwealth waters but only those Australians directly working for foreign-owned gas companies tend to benefit.

It is time for the Labor government to show it is different from the weak coalition of Liberals and Nationals, who were in government for the past three terms and did not introduce a domestic reserve of gas for Australia's use.

A handful of integrated foreign oil and gas companies control Australia's offshore oil and gas leases. These oil and gas giants joint venture with each other and they operate across the value chain from exploration, production, to transport, refining and marketing.

Despite their size these oil and gas companies still need to borrow to fund new projects. Lenders are willing to extend credit to these companies if the companies have long term contracts to underpin repayments to the lender.

Foreign owned multinational exporters now supply locally produced gas to foreign markets under long term agreements, with the result that in 2019-20 74% of Australian produced natural gas was exported.

These long-term agreements made with China, Japan, South Korea, and other south east Asian markets are for gas at prices which are much lower than today's international spot price, which explains why gas turbine operators, households and businesses in these countries pay less for our gas than we do.

The current shortage of gas in the eastern states is caused by onshore gas being exported on long term contracts.

There are gas reserves on the Australian landmass. This gas belongs to the states. My Bill is about the gas reserves under the seabed in Commonwealth waters.

Before I go on, I want to put on the record—again—that foreign integrated gas companies don't pay Australia for the gas they take from the Commonwealth seabed. They recognise their world-wide expenses in Australia and their revenues in a low tax country, which means they pay next to nothing on the profits made with Australian gas. If we can't get paid for our gas, then at least we can buy some of our gas at the same price as it is sold overseas.

Every permanent migrant arriving here increases carbon emissions and increases the need for gas to provide electricity at night and when wind speeds are too high or too low.

The Coalition government's response to the domestic shortage of gas and high prices for the gas was the Australian Domestic Gas Security Mechanism (ADGSM).

The ADGSM has been used to delay the creation of a domestic reserve for gas. We know that, because in 2018 and 2019 the east coast LNG joint venturers agreed to offer the uncontracted gas first to the Australian market in return for the Coalition government not implementing a domestic gas reservation policy. It is stating the obvious that you can't trust the Coalition.

The shortcomings of the ADGSM identified by the Productivity Commission mean it cannot be the long-term answer to gas shortages. The proposed price caps are expensive and short term with the taxpayer saving nothing.

The government's proposed mandatory code for energy will fail because it will undermine the case for new investment and create a gas supply crunch according to the Australian Petroleum Production and Exploration Association (APPEA), the peak body for the oil and gas companies.

Government needs to find a permanent solution to gas shortages; our need for gas is ongoing and increasing because coal fired power stations are timetabled to shut.

Gas also controls the rate of absorption of solar and wind generated electricity into the NEM because it is the fuel providing back-up electricity at night, or when the wind speed is too high or too low.

We need gas for electricity generation, and we need it for manufacturing. Gas cannot be substituted in many manufacturing processes including the production of fertilisers, non-ferrous metals, aluminium, glass, chemicals, and galvanised steel.

The importance of gas is seen in the government's decision to build the Kurri Kurri gas-fired plant at a cost of $600 million dollars. The Kurri Kurri gas plant is expected to operate 2% of the time. In time the government hopes the plant will operate on a mix of 15% green hydrogen and 85% gas at a cost of another $700 million dollars.

Zero net emissions will mean lower standards of living, which equals worse health outcomes, lower paid jobs, crowded housing, and an increasingly inequitable society.

The government says there will be jobs in renewables. What they don't say is that electricity will become permanently more expensive, leaving less money for other things, and that the most vulnerable people will be much worse off.

My Bill proposes a petroleum reserve in Commonwealth waters, including off the coast of Western Australia. There is no reason the eastern states should not be able to enter long term contracts for petroleum or gas in the way Western Australia does.

The sovereign risk argument does not exist, because all that I am proposing is widening of the client base from Western Australia to all states and territories.

A national gas reserve in offshore waters would provide energy security, lower the cost of living for families and save Australian manufacturers.

It is not in the national interest to allow the world's biggest oil and gas companies to export most of Australia's gas, leaving the domestic market short. Australia has a gas export problem which needs solving.

In October 2022 the government announced it would consider options for a prospective national gas reservation scheme in the White Paper titled 'Gas reservation issues paper' but failed to follow through.

Foreign-owned multinational oil and gas companiesrecoil in horror at the suggestion of a domestic gas reserve. They claim a domestic gas reserve in offshore waters would discourage future investment, but we know from the experience in Western Australia that the claim is baseless.

Western Australia has had a domestic gas obligation since 1977, and later the formal Domestic Reserve Policy which has operated since 2006.

In other words, the domestic gas obligation has existed in Western Australia for over 40 years, co-existing with growing foreign investment.

The obligation to provide 15% of gas to WA did not stop Chevron making the largest single investment in Australia's history: the $80 billion investment in the LNG Gorgon Project on the North West Shelf.

The Western Australian government and the WA DOMGAS Alliance, the peak gas user group, support a national gas reserve so long as a carve out is made for Western Australia. This represents a massive windfall for Western Australia because 93% of Australia's conventional gas resources are found offshore in the North West Shelf.

The North West Shelf accounts for 71% of Australia's chilled gas exports, which in 2022 had a value of $65.8 billion. On this basis the domestic gas obligation was worth just under $10 billion to the Western Australian economy. This gift of $10 billion annually of a resource owned by all Australians is not directly considered through the horizontal fiscal equalisation process which underpins the distribution of GST.

Furthermore, Western Australia takes the lion's share of the royalty regime which applies to two petroleum leases known as WA-1-P and WA-28-P.

The Western Australian government is addicted to Commonwealth-owned petroleum resources. The domestic gas obligation underpins the Western Australia's economy, with 57% of the state's electricity generated from gas, 28% from coal and just 15% from wind or solar.

The balance of the gas supplied under the domestic gas obligation is used in the manufacture of fertilisers, chemicals and products which require very high temperatures like aluminium, non-ferrous metals, galvanising steel with zinc, and glass.

The WA Government would argue that its ok for WA to keep $11 billion dollars' worth of gas annually from the other states because Australia benefits from all exported gas. Of course, it is wrong to think that because the $92.8 billion in exports is added to Australia's GDP: a mirage in the Australian economy.

My proposal for a domestic reserve is broad-based with regulations to define the details. There is no effect on foreign companies because they already have an obligation to sell to the Western Australian government. Supplying another state or territory government changes nothing for them.

I commend the Bill to the Senate.

I seek leave to continue my remarks later.

Leave granted; debate adjourned.