By Keith Orchison
(The Weekend Australian Weekend Professional report 12-13 June 2010)
The huge trade deficit that Australia is confronting in transport fuels has widened, with the federal government now predicting that it will grow from $16 billion this year to $30bn in 2015.
The problem arises from a decline in Australia’s oil supply from 100 per cent self sufficiency in 2000 to 54 per cent in 2008, with the level forecast to be just 18 per cent in 2030 when demand is expected to reach 470 million barrels a year while supply slumps to 80 million barrels.
In the national energy resource assessment by Geoscience Australia and the Bureau of Agricultural & Resource Economics, released earlier this year by Federal Resources and Energy Minister Martin Ferguson, net oil imports were valued at $5.5 billion in 2007-08.
Add purchases of refined petroleum products and the bill two years ago was about $12 bn.
How much bigger the transport fuel deficit can get, as demand for petroleum products rises and domestic production of crude oil continues to fall, is an open question, depending in part on international crude oil prices and the value of the Aussie dollar.
Queensland Energy Resources, the company seeking to develop a $5bn oil shale project near Gladstone, cites economic modelling showing that the deficit could be as much as $128bn by 2030.
Under a lower growth scenario, import needs could be reduced by about 65 million barrels a year, cutting the import bill to some $90bn annually.
QER claims that development of its Queensland oil shale deposits – a move hotly opposed by the environmental movement – could deliver supply of 73 million barrels of oil a year by 2030 with the potential to reduce the import bill by more than $12bn a year.
QER chief executive Pearce Bowman says that the development could also enable Australia to show the way to unlocking up to 3,000 billion barrels of oil in shale deposits around the world.
The Geoscience Australia-ABARE assessment says the oil shale industry is faced with the challenge of achieving large-scale commercial production in the face of the uncertainty and volatility of future crude oil prices while it also needs to deal with a number of environmental issues, including greenhouse gas emissions.
The most recent estimates of Australian proven crude oil reserves set them at 4.2 billion barrels, which would last 20 years at present rates of production.
However, demand for diesel fuel is predicted to increase 60 per cent between now and 2030, with consumption of aviation fuel rising 80 per cent.
This will occur while Australia’s main supply region, the Asia Pacific, is facing projected reduced oil production and strong increases in demand from China and India. This could mean that Australia becomes reliant on importing its oil requirements from the Middle East, West Africa and the countries of the former Soviet Union.
As Ferguson says: “We’ve got huge problems on the (transport fuel) trade front, but also importantly a real problem in terms of energy security and our economic future by 2015.”
The alternatives for Australia in reducing the trade deficit are three: dramatically cut fuel demand, a prospect thought unlikely even if electric vehicles start to win support over the next two decades, find a lot more oil by pursuing increasingly expensive exploration in deeper offshore areas or turn to supplying diesel from oil shale, gas or coal.
The potential for finding oil in so-called frontier areas offshore is speculative at this stage. Geoscience Australia and ABARE say that “there is no publicly available resource assessment of Australia’s undiscovered oil resources that adequately reflects the new knowledge gained in recent years of increased company exploration.”
The agencies add that major new discoveries could arrest the crude oil production decline just as the discovery and development of new fields in the Carnarvon and Bonaparte basins offshore north-west Australia in the 1980s helped to replace the declining production of the giant Bass Strait fields offshore Victoria, the mainstay of national oil supply for more than three decades.
One plus for Australia is that the large gas fields awaiting development in offshore waters along the North-West Shelf are also condensate-rich.
The yet-to-be-developed Ichthys gas resource in the Browse basin, for example, is believed to contain almost half a billion barrels of condensate, 20 per cent of the estimated national resource.
Because the condensate reserves are located far from Australia’s major demand centres on the southern seaboard, the fuel will be mostly exported, but revenue from this trade will help offset the bill for importing crude oil and refined petroleum products.
Even with the future bounty of the condensate sales, however, Australia’s transport fuel trade outlook for the immediate future and the longer term seems to be bleak.