Domestic Gas Strategy
- implementation report
Report to the Council of Australian Governments’ Energy Council
(COAG Energy Council) on the implementation of the Domestic
Gas Strategy – January 2016.
Released in April 2015, the Domestic Gas
Strategy (the Strategy) identified a number
of key actions that the Australian
Government will undertake to support the
responsible development of unconventional
gas resources.
The Government has already made
significant progress in delivering on key
activities, particularly enabling and
disseminating scientific research across
physical and social science, improving
competition and transparency in gas
markets, improving information on gas
reserves, supporting innovation in the oil
and gas industry, and facilitating sharing of
information across jurisdictions in Australia
and internationally.
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Objective
The Strategy aims to support the
responsible development of coal seam,
shale and tight gas resources for the
benefit of all Australians. This report
highlights the achievements made under
the Strategy in the first year of
implementation and outlines key
next steps.
Background
The regulation of gas supply is primarily
a state responsibility, and individual
jurisdictions have been taking active steps
to address gas development issues in a
manner that meets the expectations of their
local communities. The Strategy outlines
how the Australian Government can support
the responsible development of
unconventional gas resources by:
1. Improving gas markets to enable better
access and price discovery for all market
participants including customers;
2. Understanding and responding to
potential social impacts to build
confidence that community needs and
expectations will be properly considered;
3.Understanding and communicating
the results of scientific work to build
confidence in the community that
risks and environmental impacts can
be managed;
4.Attracting investment and encouraging
steady and predictable supply through
better regulation;
5.Tailoring production technologies for
Australia to ensure we are making
the most of our resources;
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6.Establishing an Oil, Gas and Energy
Resources Industry Growth Centre
to accelerate advancements within
the industry;
7. Improving access to geo-scientific
precompetitive data to understand
our resources and attract investment;
8.Demonstrating the macroeconomic
benefits to build community confidence;
and,
9.Learning from mistakes and successes
of other jurisdictions through sharing
knowledge.
For each of these activities, the Government
identified key actions that would contribute
to achieving the Strategy’s objective.
• AEMO is also continuing to work towards
establishing a new gas trading hub in
Moomba based on the Wallumbilla model.
The Moomba Hub is expected to begin
market trials in May 2016 and launched
in June 2016. This will create new
opportunities for gas producers and
consumers to trade wholesale gas, which
will generate better opportunities for
price discovery.
• Implementation of the recommendations
from the Australian Energy Market
Commission’s (AEMC) East Coast
Wholesale Gas Market and Pipeline
Framework Review Stage One to enhance
the transparency and efficiency of the
market recommendations. These include:
Headline achievements
• A new gas price index to improve price
transparency.
Improving gas markets
• Reducing complexity with harmonised
gas market start times.
Key action:
• Continue to work with the state and
territory governments through the COAG
Energy Council to bring on new supply
and improve market transparency and
competition, making it easier for all
market participants, including customers,
to access supply and make more
informed decisions about their gas needs.
Gas Market Reforms
The Australian Government continues to
work with state and territory governments
through the COAG Energy Council to
implement the Australian Gas Market
Development Plan to deliver on the Gas
Market Vision. Implementation of the
following work streams is underway:
• The Australian Energy Market Operator
(AEMO) released the draft Wallumbilla
Hub (Queensland) Services review, which
has identified ways to increase trading by
implementing a single Wallumbilla
wholesale gas product. Implementation
is underway and will occur via a staged
approach over a 12 month period. This
will support the establishment of more
transparent and accessible trading at the
Wallumbilla Hub which will improve price
discovery for wholesale gas trade.
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• Removing restrictions on who is able to
propose rules changes for the Victorian
Declared Wholesale Gas Market. This
will bring the process for making rule
change requests in line with the current
open standing process applying to the
Short-term Trading Market.
• Enhancing information to improve
gas pipeline trading capacity.
• The Australian Competition and
Consumer Commission (ACCC) is
undertaking an inquiry into the
competitiveness of the wholesale gas
industry. The inquiry is considering
wholesale gas prices in the context of
Eastern Australia’s gas production,
processing, transportation and storage
infrastructure. The focus is on upstream
competition and, in particular, price
setting and contracting between
producers and buyers. This inquiry is
expected to be completed by early 2016.
Gas Supply Strategy
In December 2015, the COAG Energy Council
agreed to the Gas Supply Strategy. The Gas
Supply Strategy is the Council’s
commitment to improving collaborative
efforts between jurisdictions on scientific
and regulatory issues associated with
onshore gas. The Council recognises that
more can be done collectively to determine
the role that different forms of gas play
within individual jurisdictions. The Gas
Supply Strategy identifies four opportunities
for deeper collaboration to improve
collective understanding of the issues
associated with a rising reliance on gas from
unconventional reservoirs, improve the
information available to the community and
regulators on development activities, and
lead to refinements to existing COAG Energy
Council frameworks. These opportunities
are:
1. Improving information on gas reserves
and production potential.
2. Improving public availability and
accessibility of the outcomes of rigorous
science and factual information.
3.Consideration of leading practice
regulatory frameworks that effectively
manage the risks and address issues
for all conventional and unconventional
gas resources.
4.Supporting leading practices in industry
to support responsible development.
More information on the COAG Energy
Council’s gas market reform agenda is
available at: http://www.scer.gov.au/
Individual jurisdictions will determine their
level of participation in this gas market
development work and how they will use
the outcomes of the Gas Supply Strategy.
However, COAG Energy Council members
will continue to share information and
experiences, regardless of individual
Government policy positions. A detailed
implementation plan, with clear
accountabilities and timelines, will be
developed in the first half of 2016 in
conjunction with consultation with
industry and other stakeholders.
More information on the ACCC’s
wholesale gas market inquiry is available
at: https://www.accc.gov.au/
More information on the Gas
Supply Strategy is available at:
http://www.scer.gov.au/.
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Review of the socioeconomic
impacts of coal seam gas
in Queensland
Key Action:
• Finalise and release the Department of
Industry, Innovation and Science review of
the economic impacts of the CSG industry
in Queensland to inform the community,
using real examples, of the economic
benefits that can flow from the
development of gas.
On 9 October 2015, the Office of the Chief
Economist released its Review of the
socioeconomic impacts of CSG in
Queensland.
The review provides a timely synthesis of
the impacts of CSG development, defined
broadly to encompass both headline
economic indicators and other factors
which influence wellbeing. It found that the
economic impacts of CSG development are
consistent with other natural resource
developments, with net positive impacts on
employment, income, output and
government revenue. Broader community
impacts, including social, demographic, and
health outcomes, differ from other
developments as a result of the geospatial
dispersion of CSG activities, and
uncertainties in some communities about
potential environmental impacts.
The full report is available for download
at: www.industry.gov.au/coalseamgas
Gas Industry Social and
Environmental Research
Alliance (GISERA) expansion
Key Actions:
• Support the replication of the GISERA
model to states across Australia to enable
research to extend into emerging areas,
including tight and shale gas.
• Utilise and expand GISERA’s scope and
reach as a way to disseminate trusted
information to communities.
GISERA was established in Queensland in
2011 through a partnership between CSIRO
and industry to provide Australian
governments, industry and the community
with expert scientific advice into the
environmental, social and economic impacts
of the natural gas industry. To ensure
research is independent of funding,
GISERA’s management is subject to unique
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governance arrangements that preclude the
industry funders from influencing how the
research is conducted. Current research
topics include: socio-economic impacts,
surface and groundwater matters, the
greenhouse gas footprint of the coal seam
gas industry, agricultural land management
issues, biodiversity and marine environment
impacts.
On 11 August 2015, the Australian and New
South Wales (NSW) Governments
announced funding through CSIRO, to
extend GISERA into NSW. The Australian
and NSW Governments are investing
$3 million in a strategic alliance with CSIRO
and industry to expand research into the
onshore gas sector’s social and
environmental impacts. The expansion of
GISERA is a key initiative of the Strategy to
help build community confidence through
the provision of independent research into
the gas industry.
More information about GISERA
and its research is available at:
http://www.gisera.org.au/.
2015 Academy of
Technological Sciences and
Engineering Unconventional
Gas Conference
Key Action:
• Consider collective findings and shared
learnings from the Academy of
Technological Sciences and Engineering’s
(ATSE) International Conference on
Unconventional Gas.
The ATSE Unconventional Gas Conference
was held in Sydney from 22-23 September
2015. The conference speakers included
well-regarded international scientists, social
scientists and economists.
In November 2015, the ATSE Conference and
Workshop Outcomes Communiqué was
released, outlining a set of credible findings
on the way forward for unconventional gas
which can be used by academies and
related organisations to produce
recommendations for governments and
regulators. The Key Findings are
summarised in eight main themes:
1. Unconventional gas resources:
Unconventional gas can be produced
in a manner that is environmentally
responsible and that provides significant
societal benefits, provided best practice
is followed.
2. Addressing community concerns:
Gaining community support for
unconventional gas developments
requires sustained engagement,
recognition of prevailing community
values, communication of scientific,
technical and socio-economic information
by trusted sources, certainty in the
regulatory regime and confidence that
long term socioeconomic benefits
will accrue.
3.New knowledge: Research in
sedimentary basins will reduce gaps in
our knowledge of unconventional gas,
decrease project costs and impacts,
improve regulations and contribute to the
development of a risk-based approach to
regulation and to the management of
environmental and community impacts.
4.Hydraulic fracturing: Provided best
practice is followed and there is
comprehensive knowledge of the sub
surface, hydraulic fracturing is unlikely to
cause damaging seismic events or result
in widespread, systemic impacts on
drinking water resources.
5.Groundwater: Poor well construction and
improperly decommissioned wells are
risks to groundwater and it is important
to be able to demonstrate life-time well
integrity and remediation responsibility
for unconventional gas wells and adopt
best practice for waste water disposal and
management of materials and chemicals.
6.Protecting landscape and the
environment: Cumulative environmental
and biodiversity impacts can be
minimised, using a risk-assessment
framework along with better planning of
infrastructure and integrated land
management.
7. Emissions: Fugitive methane emissions,
which can be significant over the lifetime
of an unconventional gas project, need to
be monitored and a baseline established,
in order to remove uncertainties
regarding the magnitude of these
emissions and provide a basis for
remedial action.
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8.Regulations: If regulations are to meet
community expectations, protect the
environment and reduce costs to industry,
they must have clarity of purpose,
transparency and engender trust.
The ATSE Communiqué is available at:
http://www.atse.org.au/
The Australian Energy
Resources Growth Centre
Key Action:
• Establish the Oil, Gas and Energy
Resources Industry Growth Centre.
The Australian Energy Resources Growth
Centre is expected to be operational from
first quarter 2016. The Growth Centre will
support the growth in Australia of the oil,
gas, coal and uranium sectors and their
suppliers. Through a national focus the
Growth Centre aims to improve
competitiveness, collaboration and
productivity by focusing on reducing
cost, directing research to industry
needs, improving work skills, facilitating
partnerships and reducing
regulatory burden.
Further information on the Australian
Energy Resources Growth Centre is
available at: www.business.gov.au.
Water and
environmental issues
Key Action:
• Continue to support the Independent
Expert Scientific Committee on Coal
Seam Gas and Large Coal Mining
Development (IESC) and undertake the
Bioregional Assessment Programme and
other research in order to provide robust
advice and scientific information to better
inform regulators.
By the end of 2015, the IESC provided 91
pieces of advice to Australian and state
government regulators covering 67 different
projects; 14 of which were related to coal
seam gas proposals (eight located in
Queensland, five in NSW, and one in South
Australia). IESC advice ensures that
decisions by environmental regulators on
coal seam gas development proposals are
informed by the best available science.
The Bioregional Assessment Programme is
over half way through completion, with an
anticipated end date in mid-2017. The
science-based studies follow a methodology
to develop multi-layered records of the
natural environment in specific bioregions.
The studies analyse the ecology, hydrology,
geology and hydrogeology of bioregions,
with explicit assessment of potential direct,
indirect and cumulative impacts on water
resources both above and below ground.
Bioregional assessments will be key tools for
decision makers in government and industry,
the IESC, and other interested parties to
better understand and manage the
cumulative impacts of CSG and large coal
mining development on surface and
groundwater. As of the end of 2015, the
programme has published 36 reports since
May 2014. These include:
• Context Statements which incorporate
information and characteristics to
improve our understanding of how the
whole water system works have been
released for these subregions: Galilee
(Qld), Namoi, Central West, Hunter,
Gloucester (NSW) Cooper, Gwydir,
Maranoa-Balonne-Condamine, ClarenceMoreton (Qld and NSW), Arkaringa (SA),
Pedirka (NT and SA), and Gippsland
basins (Vic).
• Coal and coal seam gas resource
assessments for the Galilee, Cooper,
Maranoa-Balonne-Condamine, Gwydir,
Namoi, Central West, Hunter, Gloucester
and Clarence-Moreton basins.
• Description of the water dependent asset
registers for Maranoa-BalonneCondamine, Namoi, Clarence-Moreton,
Gloucester and Gippsland basins .
• Data registers for Galilee, Cooper,
Maranoa-Balonne-Condamine, Gwydir,
Namoi, Central West, Hunter, Gloucester,
Clarence-Moreton and Gippsland basins1.
The Department of the Environment’s
research programme is also strengthening
the science which underpins regulatory
decisions, by informing the advice the IESC
provides to regulators. The research spans
four priority themes identified by the IESC:
hydrology, ecosystems and water, chemicals,
and cumulative impacts. As at 30 December
2015, over 20 research projects have been
commissioned, and 18 technical reports and
four facts sheets are published on the
Department’s website.
Further information on the IESC, bioregional
assessments and other research is available
at: www.environment.gov.au/water/
coal-and-coal-seam-gas/ office-of-waterscience.
Demonstrating the
macroeconomic benefits to
build community confidence
Key Action:
• The Department of Industry, Innovation
and Science, in consultation with Treasury,
will continue to undertake work to
quantify and demonstrate the broader
macroeconomic benefits to Australia from
unconventional gas development.
Total Australian exports of liquefied natural
gas (LNG) are expected to grow significantly
by 2016 17 as the more advanced LNG
projects begin production. By 2016 17, the
value of LNG exports is expected to roughly
double its 2014-15 level, to a total of $31.7
billion. This would see it surpass both
thermal and metallurgical coal export
values, currently Australia’s second and third
largest exports by value. This strong growth
is expected to add 0.75 percentage points to
real Gross Domestic Product (GDP) growth
in 2016-17. Continued robust growth is also
expected beyond the forecast years as
additional projects come online, with
Australia likely to overtake Qatar to become
the world’s largest LNG exporter before the
end of the decade.
LNG project construction has also been
a key driver of investment and growth in
Australia’s economy over the past few years.
From 2009 10 to 2016-17, LNG investment is
expected to exceed $200 billion of which,
unconventional gas projects have accounted
for over $60 billion worth of investment.
LNG investment is estimated to have peaked
at over $50 billion in 2013-14, contributing
around 0.7 per cent to nominal GDP growth
in that year. Put another way, LNG
investment accounted for almost one fifth
of economic growth in 2013 14.
1 A water-dependent asset is one that could potentially be
impacted by changes in groundwater or surface water
due to coal or coal seam gas resource development.
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As most of the LNG construction in
Australia nears completion, the slowdown in
investment is now contributing less to GDP
growth. That said, the investment in
productive capacity will contribute to
Australia’s economy for many years through
increased LNG exports.
• CSIRO, through GISERA, to complete
socio-economic research that provides
information to communities to enable
them to derive maximum benefit from
CSG developments. Currently GISERA has
16 environmental, social and economic
research projects underway.
Within the LNG sector, CSG projects on the
eastern seaboard will contribute between
a third and a half of national production.
• Further identification of opportunities to
support GISERA’s expansion and enable
research to extend into emerging areas,
including tight and shale gas.
Next Steps
The Australian Government has made
significant progress in implementing the
key actions from the Domestic Gas Strategy.
Key actions to be undertaken during
2016 include:
• Identification of ways to strengthen links
between the Forum of Australian Chief
Scientists and the COAG Energy Council’s
Exploration Investment and Geoscience
Working Group to enable a broader
exchange of ideas and expectations2.
• The Gas Supply Strategy Implementation
Plan will be developed for the COAG
Energy Council’s consideration in
mid-2016. The implementation plan will
have clear accountabilities and timelines,
developed in consultation with industry
and other stakeholders.
• Improve knowledge of the environmental
impacts of shale and tight gas
development and seek to address
scientific knowledge gaps to enable
improved measurements for
environmental baseline and impact
monitoring.
2 The Forum of Australian Chief Scientists provides
independent advice to the Australian government and
respective state and territory governments, to encourage
a national approach to science priorities; research and
development efforts; and encourages stronger links
between government, industry and research
organisations.
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• Continue to support the Independent
Expert Scientific Committee on Coal
Seam Gas and Large Coal Mining
Development and the dissemination of
the Bioregional Assessment Programme
and other research products in order to
provide robust advice and scientific
information to regulators.
• Continue to publish environmental,
information, data and analysis in
accessible forms and improve access
to baseline data and monitoring data
through such programmes as the
Department of the Environment’s
Bioregional Assessment Programme.
The data will be made available on an
Information Platform 3.
• Support CSIRO’s partnership with the
Lloyds Register Foundation (UK) to
develop international best practice
industry standards for unconventional
gas exploration and production to inform
regulators.
Cover image: Tharlane property in the Fairymeadow
district near Miles. Courtesy of QGC.
3 The Information Platform is a new web portal that
will host an interactive data library for the Bioregional
Assessments, and will include and visualisation of results.
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