Qatar currently is the leading producer of LNG in the world with total capacity of 77 million metric tons per year (MMmt/year). Australia is the fourth largest producer with 23 MMmt/year (1.1 Tcf/year). However, with seven major LNG projects with a combined capacity of more than 60 MMmt/year (2.9 Tcf/year) under construction, Australia is set to eclipse Qatar by 2017.

The Hon. Martin Ferguson, minister for Resources and Energy since December 2007, said in a speech to the Australia Gas 2012 conference Nov. 2, 2012, that under the right policy settings and demand, the Australian Bureau of Resources and Energy Economics forecast that the country’s LNG export capacity could reach as high as 130 MMmt/year (6.2 Tcf/year) by 2035.

The major challenge for Australia is to deliver projects on time and on budget, which will be critical to remaining competitive with emerging sources of LNG supply in Russia, East Africa, and the US.

The government is marshaling its resources to deal with the challenges facing its oil and gas industry. All levels of Australian government are working through the Standing Council on Energy and Resources to develop a national harmonized framework to regulate coalseam gas (CSG) operations. This includes a multiple land use framework to deal more broadly with local communities and the public. An independent expert scientific committee will provide advice where CSG development might affect water resources.

To address the lack of skilled workers, the government devised the National Resources Sector Work Force Strategy, which includes enterprise migration agreements. For infrastructure needs governments and industry are collaborating through the Regional Infrastructure Fund, National Ports Strategy, and National Land Freight Strategy to address bottlenecks.

For the domestic gas infrastructure the government will provide US $18.2 million over 10 years to the Energy Pipelines Cooperative Research Centre.

These efforts point to the strong support of all levels of government to the development of Australia’s resources. The government also is very aware of the concerns of its citizens in the areas of culture, environment, safety, and quality of life.

Ferguson talked with E&P about the state of the energy industry and Australia’s focus on unconventional resources.

Describe Australia’s energy policy and what impact you expect it to have on the industry.

In November last year I released the Australian government’s “Energy White Paper,” which sets out a strategic policy framework to guide the ongoing development of Australia’s energy and resources sectors.

Australia’s national energy policy objective is to provide the settings to deliver secure, reliable, clean, and competitively priced energy to consumers and to enhance our economic prosperity through the safe and sustainable development of our energy resources.

Central to this is the Australian government’s commitment to competitive and well-regulated markets operating in the long-term interests of consumers and the nation. With the right governance and policy settings in place, this has ensured that Australia remains an attractive investment destination. This is fundamental to Australia’s energy sector, which relies largely on foreign capital to develop our abundant and diverse energy resources and to maintain and expand our electricity and gas infrastructure.

By ensuring our energy policy is underpinned by a commitment to open and transparent markets, we have been able to secure $270 billion in investment, which will underpin our country’s wealth for generations to come.

How do you see Australia’s place in the world energy markets?

Australia has a significant position in the world energy market, being one of just three net exporters of energy in the OECD.

Australia has a particularly strong LNG sector, where we have become a global leader in the supply of natural gas. LNG exports are forecast to exceed 23 MMmt in 2012 to 2013, making Australia the third largest exporter in the Asia-Pacific region and the fourth largest in the world. Australia’s rapid rise in global LNG production can be attributed to a number of factors. Strong demand has seen new projects underwritten by some of the world’s largest supply agreements, with customers in Japan, China, Korea, and India. These demand-side drivers look set to continue, with the International Energy Agency projecting strong global demand for natural gas out to 2035.

What are the hot exploration/development plays in Australia?

In terms of offshore exploration, the northern Carnarvon basin maintains its status as attracting the highest levels of industry activity. In particular, new gas discoveries are being made on the Exmouth Plateau (gas) and in the Barrow and Dampier sub-basins (gas and condensate, minor oil).

Exploration activities also are targeting the deepwater potential of the outer Browse basin offshore Western Australia, the Vulcan sub-basin (Bonaparte basin), and the frontier Bight basin offshore South Australia.

Onshore, three major CSG-to-LNG developments are currently in construction at Gladstone, Queensland. These projects represent a total investment of more than $62.4 billion and are revitalizing many rural communities, bringing jobs and community infrastructure.

Australia also has been identified as having world-class shale and tight gas resources, and in 2012 we saw the first commercial shale gas production in the Cooper basin. Just as we saw over the past few years with the unprecedented expansion of the offshore sector, I am confident that Australia can replicate that development success onshore.

How important is the development of unconventional gas resources to Australia?

With the further appraisal of our unconventional gas prospectivity, Australia’s potential energy resources have expanded significantly. Australia has identified resources of more than 200 Tcf of CSG, almost 400 Tcf of shale gas, and 20 Tcf of tight gas.

In the LNG sector alone CSG is expected to more than double Australia’s export capacity, adding more than 25 MMmt of additional export capacity when the three projects in construction come onstream beginning in 2014. This is on top of the 19 MMmt of conventional gas-based LNG currently exported out of Australia, worth $12.5 billion in export income.

In addition, unconventional gas will be a key component in providing for longer term energy security for Australian households and industry. As the export sector ramps up, I expect that increasing demand also will drive new investment in Australian shale and tight gas potential and provide additional gas into the domestic gas market.

What challenges do the ministry and country face in terms of energy, political climate (i.e. public perception), and the environment?

The Australian government’s “Energy White Paper” highlights several key political and environmental challenges likely to impact Australia’s energy sector in the future.

These include improvements to community engagement and education in relation to new technologies and resources, climate change abatement action, and responding to the changing energy needs of both the domestic and international markets. The “Energy White Paper” outlines a series of actions to overcome these challenges and pursue continuous improvement in Australia’s energy sector.

One such example is the focus on improving community engagement and education outcomes linked in part to the rapid development of Australia’s CSG sector. Specific community concerns include the potential environmental, health, and social impacts of CSG development as well as concerns around hydraulic fracturing and land access.

The Australian energy sector’s ability to adapt to new challenges also will be put to the test as we look to cement our role in the Asian Century, achieve our domestic and international climate change commitments, contribute to sustainable and regional development goals, and continue to commercialize and deploy new energy technologies.

The challenge for the Australian government is to manage these pressures and continue to maintain energy policy that is competitive and efficient.

When will Australia have an integrated pipeline distribution system from coast to coast?

The Australian government continues to be committed to encouraging a diverse range of reliable, competitively priced energy services for Australians. The federal, state, and territorial governments, through the work on the Standing Council on Energy and Resources, have developed nationally consistent gas laws and regulations that promote efficient investment in natural gas services for the long-term interests of consumers.

The ongoing development of Australia’s gas resources, including unconventional CSG and shale gas, will continue to influence and encourage the development of supporting pipeline infrastructure that can contribute to integrating Australia’s regional gas markets.

Investment in Australia’s gas transmission pipelines is undertaken by private-sector pipeline owners that develop economically viable gas transmission infrastructure. Accordingly, the Australian government supports the private-sector development of an integrated national pipeline system where there is a viable business case for its construction.

The Australian government is continuously working toward more nationally consistent approaches to regulation, improving market signals in order to attract investment so that new pipelines are built as needed.

What impact will becoming the leading supplier of LNG worldwide have on Australia’s economy?

Australia is home to more than half of the world’s major LNG projects currently under construction. This growth has not been without its challenges. The scale of these investments, some of the largest in Australian history, necessarily creates significant workforce requirements and puts pressure on other sectors of the economy and society. This is particularly the case now given the largely concurrent scheduling of project construction.

Australia is not alone in facing these challenges, with potential projects in East Africa and the Middle East likely to face similar obstacles. However, Australia is fortunate in that there are several challenges that we do not have to overcome, such as political risk and instability and a lack of transparency in market signals.

In order to bring these and future projects to fruition, industry and government must together continue to focus on keeping production costs down, providing access to skilled labor, and increasing our productivity and efficiency.

Our work today in developing a locally based, highly skilled work force is contributing to the critical mass that will support the continued expansion of Australia’s petroleum sector into the future.

How do you see Australia’s energy industry in 10 or 20 years?

The global energy industry is highly dynamic, so it is difficult to predict exactly what the industry will look like in 10 or 20 years. However, there are a number of certainties.

First, global growth in energy demand appears set to continue, with Australia poised to play a central role in meeting this demand.

Second, the Australian government’s commitment to the core principles of transparency, competition, and leadership is unwavering. One of the key ingredients for the success of our resources and energy sectors is allowing companies to do their jobs safely, responsibly, and sustainably.

Energy investors, like all investors, require a secure and attractive investment environment based on equitable access, legal certainty, transparency of process, and appropriate market signals. Australia provides such an environment, making it an attractive destination for investment.

We have a stable regulatory framework, low sovereign risk, a highly skilled work force, and a stable economy positioned in close proximity to the key Asia-Pacific markets.

Australia’s natural gas story started almost 50 years ago in the Gippsland basin, with the startup of LNG exports from the Northwest Shelf venture commencing almost 30 years ago. Today we are in the midst of one of the most active periods of investment and growth in LNG that Australia – even the world – has ever seen.

In 20 years’ time the world will be a different place, but there is one thing I am certain of: Australian LNG will continue to power economic growth and development around the world as a safe, reliable, cleaner energy fuel.