~ Check against delivery ~
I’d like to begin by acknowledging the Traditional Owners of the land on which we meet today, the people of the Kulin Nation, and pay my respects to their Elders past and present.
It’s great to be back again with members and friends of the American Chamber of Commerce in Australia.
My last address to AmCham here in Melbourne was sponsored by Lanteri Partners, I’m pleased to see they are back behind us again. I thank you once again for your support of this valuable event.
And I thank the AmCham team for organising this event and for all the excellent work they do to promote constructive discourse in this country.
There has never been a time in my career when the need for constructive conversations has been greater than it is right now.
As I look over the vast landscape of the energy industry today, all I can say is – we really need to talk.
So I want to sincerely thank all of you for taking the time to come along today to hear what I have to say, and I’m looking forward to answering any questions you have.
This is certainly an exciting time in the energy industry. There is much heated debate about whether we should go for more renewables or fossil fuels, and we are constantly hearing of new technologies delivering energy solutions for the future.
Right now ExxonMobil is working internally and with universities around the world on all sorts of potential energy solutions for the future.
These include next generation biofuels, new carbon-based materials to make high-efficiency, low-cost solar photovoltaics and lithium-sulphur batteries that could deliver step-change improvements in storage capacity.
All exciting stuff and believe me there is lots more. You can go to our website and read all about it, because I’m not going to talk about that today.
I’m going to talk about the boring stuff you never hear about – the issues that aren’t debated.
I’m going to talk about the main game when it comes to providing our daily energy supplies.
ExxonMobil, our competitors and governments of all persuasions look into this in depth in order to plan for the future.
And there is one sobering fact we all agree on – that the world, including Australia will continue to be reliant on fossil fuels for most of our energy in the year 2040.
And this includes the most recently published Australian government projections.
We don’t hear much about this sobering fact because there is bipartisan agreement on this outlook, and our political system, feeds on debate and division.
So, instead we argue about renewables.
Wind and solar are great, and they are the fastest growing source of energy. But our energy demand is huge and it’s growing, and it takes many generations to evolve.
We currently get eight percent of our electricity from wind and solar. But this represents only 1.5 percent of our total energy demand.
It is so complex that it is easy to bamboozle people with details.
Let me give you an example.
My wife and I have two cars, and we have two bicycles – we love to ride. So therefore 50 percent of our transport fleet runs on renewable energy.
We could have a heated debate about whether we should increase that to 60 percent, by buying a new bike.
Tackling the dual challenge of meeting our energy needs with reducing our greenhouse gas emissions is an enormous, complex and costly task.
The fossil fuels we all rely on are a diminishing resource, so even maintaining supplies at current levels requires continuing major investments from large corporations as well as input from a multitude of highly skilled suppliers and workers.
This is what we should be talking about today because we have reached a turning point and we need to make some important decisions that will set the course of our economy for future generations.
But before I talk about our future, let me tell you a bit about ExxonMobil and our journey, as a company, to this point in time.
ExxonMobil Australia is the country’s oldest petroleum company, we have been operating here since 1895.
Our business covers a wide range of petroleum related activities from oil and gas exploration and production, to petroleum refining and supply of fuels and lubricants.
We have been successful for so long, because we make it our business to know what our community wants and we invest in order to provide it.
We strive to meet your expectations by providing reliable and affordable supplies of energy in a financially, environmentally and socially responsible manner.
We know what our community wants, because we listen.
We listen to the scientists to keep abreast of the latest technology, we listen to policy makers to understand their expectations and, most importantly, we listen to our community – to our customers.
We listen to each one of you, the consumers of our products.
Every time someone puts on the kettle, steps on to a plane, starts a car, buys a shirt, sprays a crop, turns on a smart phone, starts a tractor, builds a house, or delivers a baby, they are sending messages about the energy we will need to provide today and tomorrow and the next day and so forth.
These messages are fed into our global Outlook for Energy database and this is what informs our investment decisions.
Each year we take a snapshot of this database and share it. You can view this on our website.
Right now these messages are crying out for more oil and gas, here in Australia and around the world.
This year marks a couple of significant milestones in our efforts to supply this nation’s growing energy consumption.
After the war, car ownership kicked off in a big way as Ford and General Motors began to mass-produce Australian cars. That’s when we decided to invest in a refinery at Altona.
This year marks the 70th anniversary of that refinery’s opening.
As Australia’s population continued to grow with post-war immigration, and we all fell in love with the family car, oil and petroleum products became the country’s largest import item and this was seriously impacting on our balance of trade.
By the late ‘50s oil and petroleum products represented more than 12 percent of the nation’s total imports.
The Menzies Government referred to this as the “Achilles’ heel of the entire Australian economy”.
Prime Minister Menzies was determined to create an environment that would encourage exploration in the hope of finding oil in Australia. He implemented the Petroleum Search Subsidy Act in 1957, which involved a grant of 50% of the drilling costs to any explorers who met the Government’s conditions.
This was a major undertaking. Drilling exploration wells involves huge costs and the chances of success, even today, are always far outweighed by the chances of failure.
Back in 1964 we joined with BHP and went hunting for oil and gas in Bass Strait. I can’t stress strongly enough the fact that this was a high-risk, high-cost venture. Our chances of success were very slim.
But it’s now history that we were spectacularly successful. Our first wildcat well discovered Barracouta field in 1965 and within five years we had discovered 12 oil and gas fields, including Australia’s two largest oil fields and three of the largest conventional gas fields on the eastern seaboard.
This year is the 50th anniversary of first production from our Bass Strait fields.
Those nation-building discoveries in the 1960s resulted from the alignment of many diverse forces. It took the convergence of new technology, skills, knowledge, vision, determination and lots of investment capital.
They involved collaboration between government, the community, and the management and shareholders of Esso and BHP. Without the involvement and alignment of all the stakeholders, the costly and ambitious exploration program would have remained a geologist’s dream.
We got lucky, but only because a lot of people were pulling in the same direction to ensure we were in a position to get lucky.
Five years after the first discovery we began producing gas from our new Longford plant in Gippsland.
This was five years of intense activity, construction, recruiting, hiring. In order to produce that gas we had to build offshore platforms, onshore plants and the pipelines to connect them.
Building and maintaining this infrastructure involved hundreds of companies and thousands of people. They provide everything – drilling, welding, fabricating, engineering, as well as services, and supplies – training, accommodation, catering, and transport.
There are many examples of companies that were formed in order to fulfil our requirements – families starting companies over the kitchen table that then grew from generation to generation and expanded with our operations.
In the mid ‘70s Wayne and Ann Ferguson started one company providing garden maintenance and fire prevention works for our Longford Plants.
Today W.K & M.A Ferguson Pty Ltd is a large construction and maintenance engineering company that provides a wide range of services across Gippsland.
So many people have grown up, started families and built careers working around our vast Gippsland operations.
Our latest intake of apprentices includes one lad who is the fourth generation of his family to work on our Gippsland operations. His great grandfather worked on the first exploration drilling rig, the Glomar III, back in the ‘60s.
Understanding this history is important because there is a lot of destructive debate today centred on a fabricated divide between big businesses and small businesses.
That’s not the way the world works.
The reality is, when a large corporation invests in a community we create an economic ecosystem.
Whether it’s a hotel, a hospital, a refinery or an energy supply system like our Gippsland operations, we create jobs and revenue streams for service providers large and small – companies, families, and individuals.
We are all interdependent.
Today we have 23 platforms and installations out in Bass Strait feeding oil and gas into two major onshore processing plants.
These facilities provide energy 24 hours a day, seven days a week, through a network of more than 1700 kilometres of pipelines, put together these would travel from Melbourne to Sydney and back.
The platforms are supported by our private fleet of helicopters that ferry people and supplies back a forth. We have our own heliport with a large maintenance team to ensure these helicopters fly safely 365 days a year.
The logistics of keeping our economy’s vital energy supplies flowing safely and efficiently night and day, is a massive endeavour involving thousands of companies, big and small, local, national and international.
Success requires agility, investing to match changes in market expectations. This is where our Outlook for Energy database is so important.
So half a century ago we found oil and we found gas, a success which was celebrated by our nation. Over time though we’ve grown complacent and rather than celebrating the achievement, we now just expect our central heaters to run in winter, our air conditioners to run on those hot summer days, and to have fuel ready for our planes, trains and automobiles.
But this complacency has come at the same time that many of the fields in the Gippsland Basin approach the natural decline in their production. As a result we are seeing concerns arise around liquid fuel security for the nation, and gas supply on the east coast.
Let me say that at ExxonMobil, we are investing to address these supply issues, as we did half a century ago.
Across our refining and supply operations we are building significant amount of storage capacity, with two new 20 million litre tanks for petrol and jet fuel now in operation at Yarraville and 25 million litres of additional jet fuel capacity at Melbourne airport, enough to fill 1000 Boeing 737s.
At our refinery we are also building in a 100 million litre crude storage tank. To put that in perspective it will be the width of an international soccer pitch and will be able to store enough crude on its own to run our refinery, which supplies around half of Victoria’s fuel needs, for over a week.
Ongoing investment is even more imperative with our oil and gas production assets, because these are always drawing on depleting reserves.
As the reserves diminish the costs of production increases. There comes a point where the cost to produce it is more than the customers would be willing to pay.
However, by finding ways and means of lowering the costs of our operations through innovation and efficiencies we can extend the viability of the energy source.
As you may have read recently we have now made the final investment decision on a new development project, the West Barracouta gas field. This involves drilling two new wells, tied back to the Barracouta platform with a five kilometre subsea pipeline.
We also continue to explore a number of prospective leads in the VIC/P70 exploration acreage.
But these are the big ticket items, the ones you read about in the papers, even if just the business section these days. What you don’t hear about is all the work we’re doing to refine and enhance our gas production system so we can get every last petajoule out to Australian homes and businesses.
I hope I have given you a picture of what it takes to provide the energy that you and I expect at the flick of a switch or the turn of a key.
It requires constantly solving highly technical problems, it requires a steady stream of new ideas and it requires a lot of investment capital.
Very few people get to glimpse behind the curtain to see all that backstage activity. I have to say that, as an industry, we do an amazing job.
As a result I think we have become victims of our own success.
There are millions of households and thousands of businesses that rely on the gas we produce every day.
Apart from generating electricity, cooking meals and heating homes, gas is an essential source of energy and raw materials for commercial businesses and manufacturing industries.
About 225,000 people work in manufacturing sectors that rely heavily on gas, producing metals, fertilisers, glass, ceramics, paper, plastics, as well as food preparation and processing and, of course, brewing.
Another 500,000 people work in related industries that do business with these manufacturers.
This is all part of the ecosystem that feeds off those resources we discovered deep below the earth’s surface all those years ago.
Maintaining this vast ecosystem will require new capital investments – investments that can only come from large corporations.
On the east-coast we have a flurry of activity right now as many producers compete to fill the supply shortfall from our declining historic fields.
For our part, we are using innovation and trialling new technology in order to extract all we can from our Bass Strait fields, we are also continuing to explore in the deep water in search of new fields, and, like many, we are studying the prospect of a gas import terminal.
Without the community and government support and collaboration we enjoyed half a century ago, we are all swimming against the flow.
If there is one fundamental change in our industry that I have witnessed over my career, it’s the increased involvement of our community stakeholders.
Today the community clearly wants to have a greater say in where our energy supplies come from and how they are developed.
This creates a dual challenge for industry, not only do we need to find, develop and produce the energy required by our community, we now need to demonstrate why it’s needed - and not just expect that it will be celebrated like in the old days.
There is no debate about the energy we will need in the foreseeable future.
Today Australia consumes twice as much oil as we did when Bass Strait production began.
The question we face now is where will we get our oil and gas from, and how much will it cost us?
We all need to be working together to find the next Bass Strait.