“Our adversaries’ emphasis on shutting down fossil fuel projects has had no effect on consumer demand and no effect on reducing emissions,” he said. “What he did was push fossil fuel development to places like the Middle East and Russia.”
It also means a sudden increase in profits for traditional energy companies everywhere, including Australia, given our massive exports of LNG and coal. The concept of energy “security” has suddenly become extremely valuable, especially in Europe.
This certainly accelerates both investment in renewable energy as a longer-term alternative, but also the frantic search for reliable oil and gas supplies to quickly replace those from Russia.
Davies recognized that the world needed renewable energy to succeed, as well as industries like oil and gas. He even claimed that record oil, gas and coal prices were “not good for anyone” given the detrimental impact of the current energy crisis on so many economies and industries, including the agriculture, and risks of rising inflation.
Australia is not immune to this, with spot gas prices in the wholesale market more than three times their normal rates. This creates immediate havoc for up to 30% of domestic industrial and manufacturing customers who use the spot market. All Australian manufacturers also realize that their contract prices will eventually rise in line with world energy prices, regardless of political promises of lower prices.
Yet the option of developing more onshore gas supplies remains elusive given strong community opposition, a position reflected by several state governments outside Queensland. And even the Premier of Queensland snubbed the APPEA conference with a last-minute absence to attend the opening of a BMX track on the Gold Coast. She must think that no vote will be lost by this exchange.
Anthony Albanese has always been reluctant to campaign on the specific cost of Labour’s tougher emissions reduction targets for companies, including big resource companies, that are not cutting fast enough. The political legacy of the last election means that Albanese – along with Morrison – prefers to focus on the more vague promises of new opportunities and jobs to come from the “energy revolution”.
Yet even the short-term emissions reduction targets promised by big business in 2022 increasingly exceed those of the federal work as well as the Coalition’s more modest timeline.
Oil and gas companies certainly appreciate the growing demand from shareholders and customers for accelerated progress on decarbonization, which means they must urgently adapt their operations despite their current healthy financial results. This requires more than paying extra for carbon offsets and carbon credits.
“If we’re serious about decarbonization, we need to focus on reducing emissions from their production and use,” Davies said. “It puts our industry at the forefront of the decarbonization challenge.”
Any such progress in this industry relies heavily on confidence in the future capacity for carbon capture and storage (and increasingly carbon capture, storage and use, known as CCUS) despite a dubious and disputed business history so far.
After heavy criticism for its missed targets, the world’s largest CCUS project is operating at the Gorgon LNG project off the WA coast while Santos is constructing another large-scale project at Moomba in South Australia.
But the industry also recognizes the need for significant investment in the development of new energy sources like hydrogen – the energy world’s new hope despite a similar lack of commercial scale so far.
The main argument here, embodied in Andrew Forrest’s excoriation of any new gas project, is whether hydrogen should be entirely “green” – created by renewable energy – or blue – a process that uses the gas to separate hydrogen.
An APPEA conference is hardly going to admit that the fossil fuel industry has a limited future in the energy transition – and less so than ever. But big companies are desperate to convince all stakeholders of their successful efforts to simultaneously reduce their emissions at an ever-increasing rate.
None of these details will be enough to persuade critics like Forrest or the community at large – especially in inner suburban seats – of the oil and gas industry’s claim that it is in fact a part important part of the solution to climate change.
But the extent of corporate progress on those ambitions will end up being far more important in the fight against climate change than the number of teal independents elected.