Australia’s oil and gas CEOs say Australia has done enough to address climate change and protect the environment with “well intentioned” regulations choking investment in new gas projects.
Australian Energy Producers (AEP), the country’s oldest and most influential oil and gas industry association, commissioned oil and gas analysts Wood Mackenzie to examine how attractive Australia was to foreign gas investors.
The report, released on Monday ahead of the association’s annual national conference in Brisbane, suggested Australia was attracting a sixth of the investment in new gas exploration and development than it was 10 years ago.
It found Australia was comparable to Norway for new oil and gas investment but suggested the country is “not as attractive as the US” where the Trump administration has pledged to “drill, baby, drill.”
Though Trump’s policy program has proven harmful to the US oil and gas industry, the administration has sought to aggressively lock in fossil fuel production and consumption by shutting out renewable energy producers.
“The United States […] remains the most prospective jurisdiction amongst Peer Countries, and overall is possibly the most attractive destination for investment in natural gas, LNG and CCS projects,” it said.
“This is reflected in the growth trajectory of the US gas and LNG sector, with the United States competing with Qatar to be the world’s largest supplier of LNG.”
A survey of CEOs at AEP member companies blamed Australia’s “well intentioned” environmental regulation, efforts to address climate change, and specifically singled out climate activism and litigation as a threat to continued investment.
They suggested that Australia “still boasts large remaining reserves / resources and relatively high exploration success rates” but “factors such as policy uncertainty surrounding energy and climate change issues, an unstable and interventionist regulatory environment, cost inflation, the ability to obtain and maintain social license and ongoing debates about resource taxation and local content requirements must all be considered” when making investment decisions.
The Wood Mackenzie report says state and federal governments have made 25 interventions in the Australian oil and gas sector since 2012, including the creation of the offshore gas regulator National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA), the introduction of the Safeguard Mechanism, and “introduction of net zero requirements for major projects.”
Over half of oil and gas CEOs surveyed, 54%, said climate policies had a strongly negative effect on investment decisions, with 92% saying approval delays were making Australia an unattractive destination for investment.
Almost all respondents, 96%, raised concerns about “sovereign risk” – a term to describe the risk of a state defaulting on national debt but one that is increasingly used to refer to the narrow financial impact of government policy decisions on commercial interests.
“Evolving environmental and climate change policies can lead to changes in requirements during the approvals process. Increasing public scrutiny and activism require extensive stakeholder engagement, often leading to project modifications or delays,” the report said.
“Stringent environmental requirements, particularly around greenhouse gas emissions, are becoming increasingly challenging to meet.”
“Projects are also increasingly facing legal challenges from environmental groups or other stakeholders, even after receiving initial approvals.”
AEP CEO Samantha McCulloch said Australia was at risk of missing out on new investment for gas exploration and carbon-capture, utilisation and storage (CCUS) projects.
“Australia now trails peer nations such as the United States, Canada, Qatar, Norway and countries in South-East Asia and Africa in key investment areas including exploration and LNG capacity,” she said.
“Energy and climate policy must go hand-in-hand with economic policy. Without a stable policy and regulatory environment, Australia risks losing its energy edge and missing out on the next wave of global investment.”
Since the federal election, the Labor government has moved quickly to clear the deck to approve the extension of Woodside’s Burrup Hub LNG processing plant out past 2070.
Federal Labor’s newly appointed environment minister Murray Watt has been in Perth for talks with WA’s Labor government, along with industry, conservation and Indigenous groups, and says he will make a decision to approve or reject it by the end of this week.
The federal Coalition had also pledged to fast-track approvals during the election, as the LNP Queensland state government has prioritised coal and gas projects since coming to power.
AEP, formerly known as the Australian Petroleum Production and Exploration Association (APPEA) until a rebrand in 2023, has historically lobbied against efforts to address climate change.
In a newsletter sent to the association’s membership in 1996, former CEO Barry Jones outlined industry response to efforts to address climate change at the time, arguing that delay was the best course of action and that “action only by developed countries will have little or no environmental effect.”
“The longer the adjustment time frame for meeting any [emissions] targets the better. This will allow for the capital stock to be run down and new technologies to be introduced,” he said.
In 2021, the International Energy Agency said that the world had enough oil, gas and coal projects to meet its needs and there could be no new fossil fuel investment from the end of that year if the 2050 net zero target established under the Paris Climate Goals could be met.
The UN has warned that on its current trajectory, the planet is currently on course for 2.9C of warming by 2100.
