Australia’s energy (in)security and the proposed drilling in the Great Australian Bight

20 May 2019
Australia has earnt the title of the biggest exporter of LNG in the world, and yet we are currently experiencing our worst energy supply crisis to date on Australia’s East Coast. Short-term policies that prioritise over-exportation and over-extraction endanger more than just our domestic energy security, but our most precious natural ecosystems, like the Great Australian Bight.

By Dr Madeline Taylor, Academic Fellow School of Law, The University of Sydney.

Top 5 facts about drilling in the GAB

  1.  The government has advanced energy security as the reason why the Great Australian Bight should be drilled for oil.
  2.  This is because Australia needs more oil fuel stocks to comply with the International Energy Agency’s fuel stock requirements.
  3.  There are 41 Listed Threatened Species, including migratory species, marine species and cetacean species, within the proposed drilling area.
  4.  Currently, the Offshore Petroleum Regulator NOPSEMA is assessing Equinor’s Environment Plan for the proposed Stromlo- 1 exploration well in the Great Australian Bight off southern Australia at a water depth of 2240 meters. The determination date by NOPSEMA has now been extended to June 2019
  5.  Current Australian practice regarding well construction and well integrity regulations are not considered ‘best practice’ found in international jurisdictions

Should we extract oil in the Great Australian Bight?

We are now at a pivotal moment in energy policy. We can choose to continue to extract petroleum based on an evidentially empty and unregulated promise of energy security, or we can make the choice to protect the pristine Great Australian Bight and our energy future.

We must learn from our previous mistakes of over-relying on coal seam gas and focus instead on investing in renewable energy to secure our energy supply for centuries to come.1 Not only will renewables be a sustainable solution for Australia’s energy security crisis, renewable energy will add resilience to Australia’s electricity grid while saving one of our most important ecological havens, the Great Australian Bight. A ‘hands-off’ approach to regulation of energy exports and general public complacency regarding Australia’s energy future will not serve the national interest or the environment in the long run. It is time for Australia to step up and take advantage of the security renewable energy and to  refuse proposed petroleum extraction in the Great Australian Bight.

To date, the legislative framework in Australia encourages petroleum companies to regulate themselves in relation to field development by using the work program bid system in awarding petroleum licenses. Export contracts signed by Equinor over oil extracted in the Great Australian Bight will be primarily earmarked for export. This is due to the lack of regulatory requirements to sell the oil back into the Australian market or to reserve the oil for Australian consumers. Hence without binding regulation, there is no policy to ensure reliability, security and affordability of oil extracted for domestic consumers. The clear market-based approach in the reliance on private companies to realise energy security is expressly recognised by the Australian Federal Government as being a ‘shared responsibility between governments, market institutions and energy businesses’.2

Why is the Australian government thinking about allowing companies to drill in The Bight?

Australia is currently facing its most challenging energy supply crisis to date, despite paradoxically being one of the world’s largest net energy exporters.

Australia’s current responses to energy security are arguably market-based and reactive, rather than proactive. Australia is non-compliant with the International Energy Agency (IEA) obligation to hold at least 90 days of oil supply. The Final Liquid Fuel Security Review Report, currently being undertaken, is likely to recommend increased oil reserves to increase fuel security and meet the IEA obligation by 2026, and this key argument for increasing oil security has led to politicians considering drilling for petroleum in the Great Australian Bight.

Australia’s energy policy has remained tied the concepts of short-term energy security and reliability of supply, a policy which essentially ignores the International Energy Agency’s two-tier definition of energy security. The IEA demands both short-term and long-term considerations of energy security in line with ‘environmental needs’.

Is drilling in the bight creating a false security in natural resources?

The promise of fuel security through extracting natural resources within environmentally sensitive areas is not a new phenomenon in Australia. Indeed, far from it. Similar promises of energy security in the past which touted a ‘Golden Age’ of security through extracting coal seam gas have consistently been proven false.

Whilst Australia has earnt the title of the biggest exporter of LNG in the world, surpassing Qatar, the East Coast is currently facing a gas shortage of between 55-108 petjoules.3

Two-thirds of all coal seam gas being produced on Australia’s East Coast is exported. This has left the East Coast with some of the highest gas prices in the world. Gas prices have more than doubled to hit $20 a gigajoule over the past three years. In a real sense, the LNG export industry is a victim of its success, as the rush to secure long-term (fifteen to twenty years) LNG export contracts by consortia in Queensland has resulted in supply constraints for domestic consumers and increased gas prices.4 This is coupled with the private nature of export contract conditions, often bearing penalty clauses in a failure to meet export supply terms, creating regulatory uncertainty and deliverability concerns.

So what is the proposed solution heralded to alleviate gas supply shortages? Building more LNG import terminals, such as the recently approved Port Kembla Terminal, and lifting moratoria on hydraulic fracturing to extract more gas. The policy cycle has come full circle – from the assurance of energy security by extraction to the detriment of the water table and prime arable farmland, to the over-exportation of these products, and ultimately, the proposed solution is to curb the security crisis by extracting all the more.

Should we insist on ‘best practice’ regulation?

NOPSEMA currently applies API standards for well integrity. These standards were applied by BP in the Gulf of Mexico and were subject to scrutiny in the fallout of the Deepwater Horizon blowout and oil spill in the Report to the President by the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, January 2011. The API standards have been regularly touted as being the ‘lowest common denominator’ standard, rather than best practice internationally. The Norwegian standards, indeed, the standards of Equnior’s home country, are guided by principles of stewardship in taking a ‘long-term perspective’ for the benefit of its citizens. Stewardship is critical for a national regulatory system to effectively and transparently monitor and assess prospective offshore petroleum activities. Without such stewardship, it is difficult for a regulatory body to adopt ‘leading practices’ and be held accountable in the management of nations’ petroleum resources. Therefore, NOPSEMA and Australians should insist on requiring Equinor adhere to ‘best practice’ regulations and standards for well construction, well inspection and consultation of communities.

1. As stated by the ACCC ‘Solar customers are paying, on average, $538 per year less than non-solar customers, suggesting that affordability concerns are most acute for those customers who have not (and possibly cannot) install solar PV’ (page vi). ACCC (2018) Electricity Pricing Inquiry Report June 2018.
2. Australian Government Department of the Environment and Energy, (2018) ‘Energy Security’.
3. Australian Competition and Consumer Commission, Gas Inquiry Interim Report 2017-2010.
4. The three LNG export terminals for the Eastern Gas Market consist of: Queensland Curtis LNG (online in 2014); Gladstone LNG (online in 2015); and Australia Pacific LNG (online in 2015).

Madeline Taylor is an Academic Fellow at The University of Sydney, School of Law holding expertise in Energy and Natural Resources Law. Her research focuses on energy policy, natural resource contestation in land use, land access agreements and transitioning energy regulation from a comparative and socio-legal perspective. Dr Taylor has been awarded multiple Federal Grants for her work on collective bargaining and land access arrangements and has authored  over 40 peer-reviewed journal articles, book chapters and conference papers. She teaches in the areas of Real Property, Commercial and Energy Law. Dr Taylor’s most recent work,  co-authored with Professor Tina Soliman Hunter, Agricultural Land Use and Natural Gas Extraction Conflicts: A Global Socio-Legal Perspective (Routledge, 2019) examines the socio-regulatory dimensions of coexistence between agricultural and onshore unconventional gas land uses in seven jurisdictions with the highest concentration of proven unconventional gas reserves including Australia, Canada, China, Poland, France, the United Kingdom and the United States.

Header image: via Shutterstock, ID: 133874384.