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Fortescue Metals Group has used a high level summit on developing Northern Australia to continue its push for a 'use it or lose it' policy on leases on Western Australian gas reserves.

Fortescue director of external communications Tim Langmead made the comments during his keynote speech at the Northern Development Summit in Townsville.

The summit will submit recommendations to the Federal Government for its white paper on developing Northern Australia.

Speaking on the role of mining in developing Northern Australia, Langmead said Australia is heading for a "supply crunch situation" on gas and the creation of more gas projects would lower the domestic price.

"You can land gas off Northern Australia and make a 12 per cent rate of return," he said.

"Why isn't that happening? It's not happening because a lot of that gas is locked up with companies thinking about what they might do with it.

"Our point is there is a very clear market signal right now and there are [gas] companies like Apache and Santos who are saying the same thing," he said.

"But there are some policy settings that aren't allowing us to get in there and do what the companies did in the United States.

"[There are] 35 retention leases on conventional gas offshore in West­ern Australia, but they are just locking that gas up from development.

"There are companies that would love to get their hands on it and like the internal rates of returns they'd be looking at to supply the domestic market."

The speech followed an announcement on May 29 by Fortescue CEO Nev Power that the company would push for the 'use it or lose it' policy to be introduced.

Fortescue is pursuing a strategy of switching from diesel to gas across its Pilbara iron ore operations and is building the Fortescue River Pipeline to deliver gas from the Solomon Hub. It expects the strategy will save it $20 million in energy costs.

Langmead said lower gas prices would also benefit the agriculture sector, both in terms of energy costs and by lowering the cost of fertiliser.

The summit in Townsville gathered key figures from government, industry and academia, including minister for trade and investment Andrew Robb and Northern Territory chief minister Adam Giles.

Organised by leadership group ADC Forum, it hosted discussion on issues affecting the future of Northern Australia, including population growth, infrastructure, mining, agriculture, and other industries.

Langmead said for Northern Australia to grow as the century unfolds, it is critical that the mining and agriculture industries work well together.

"We are disturbed when we look around and sometimes see a failure of our industries to work together," he said.

Despite a recent slowdown, Langmead said mining would continue to play a pivotal role in Northern Australia in coming decades. He went on to state that perceptions about the slowdown in China's economy are inaccurate.

"The reality is, Chinese steel production is still continuing to grow," he said.

"In fact, it is growing at about 6 per cent. China's urbanisation story has only just begun.

"Their plan is to move hundreds of millions of people from rural china into urban areas that will require amazing steel intensity."

While GDP growth is lower Langmead said volume growth in China was actually higher now than when GDP growth was at its highest.

"In dollars, you are getting more growth today in China than you were five years ago," he said.

Emphasising the role of mining in developing Northern Australia, he said Fortescue contributed about $2 billion in royalties and taxes last financial year and created 10 000 jobs, which inluded 1200 indigenous employees.

Minerals Council of Australia's Brendan Pearson also made a presentation to the summit.

He told delegates the mining sector relied heavily on Northern Australia and would benefit from its development.

The council predicts that over the next five years, Australia could increase export volumes of its top five commodities from the current level of $120 billion to $180 billion.

Pearson said there were a number of policy settings government's needed to consider to achieve those results.

He focused on the fuel tax credit scheme, which came under fire from the Greens and other groups leading up to the federal budget in May.

The Government left the scheme intact in the budget, but Pearson warned the same argument would be made against the scheme every year and governments needed to stand firm.

"I would say that [removing the scheme] represents, in terms of present risks to growth, one of the single most dangerous assaults on growth in Northern Australia," he said.

"I think it is emblematic of some of the policy challenges that we will have over the next few years.

"That rebate is really important to a whole range of sectors in this country.

"If it was to be removed, it would be the equivalent of applying a $147 carbon tax on diesel fuel."

He said 61 per cent of the credits go to groups outside the mining industry, often for diesel power generation in off-the-grid areas, and remote indigenous communities and agriculture would be hit hard if it were removed in the future.

Former minister for resources and energy Martin Ferguson supported Pearson's argument.

Ferguson, who is now group executive for Seven Group Holdings, said claims the scheme should be abolished came up every year.

"I know as a minister it is (an option) that is actually rolled out by a number of departments every budget process," he said.

"It requires the government of the day to actually say 'no'.

"If that had disappeared in this budget round, then you would have seen more coal mines close in Queensland."

Ferguson made a passionate speech on the future of the resources sector and its ability to boost Northern Australia.

"We have to stand up and fight."

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