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Sector Competitiveness Plan Update 2020


| 2 | National Energy Resources Australia – Sector Competitiveness Plan 2020

Contents 1

FOREWORD 

4

2

NERA’S INNOVATION BLUEPRINT 8

3

IMPACTS OF THE CORONAVIRUS AND OUR RESPONSE TO SUPPORT THE SECTOR 

4

ECONOMIC DEVELOPMENTS IN THE ENERGY RESOURCES SECTOR20

4.1

AUSTRALIA’S OIL AND GAS INDUSTRY 

23

4.2

GAS AND LIQUIFIED NATURAL GAS (LNG) 

23

4.3

OIL, CONDENSATE AND LIQUIFIED PETROLEUM GAS (LPG) RESOURCES

26

4.4

THERMAL COAL 

29

12

4.5 URANIUM 

31

4.6

RENEWABLE ENERGY 

34

5

KEY CHALLENGES AND OPPORTUNITIES 38

5.1

INNOVATION AND GLOBAL COMPETITIVENESS 

40

5.2

AUSTRALIA’S ENERGY SHIFT 

41

5.3

ROLE OF GAS 

43

5.4

HYDROGEN 

44

5.5

CARBON CAPTURE, UTILISATION AND STORAGE (CCUS) 

46

5.6

ACCELERATING DIGITAL AND ADVANCED TECHNOLOGIES 

47

5.7

REMOTE OPERATIONS 

48

5.8

FUTURE WORK SKILLS 

49

5.9

EMERGING GLOBAL BUSINESS MODEL 

50

5.10

OFFSHORE ENGINEERING AND INFRASTRUCTURE 

51


6

NERA’S STRATEGIC PRIORITIES 

52

6.1

DISCOVER DIGITAL AND TECHNOLOGY SOLUTIONS TO INDUSTRY’S CHALLENGES THROUGH COLLABORATIVE INDUSTRY-LED PROGRAMS DESIGNED TO COMMERCIALISE AND APPLY R&D AND INNOVATION 

56

6.2

DRIVE COLLABORATION ACROSS INDUSTRY SECTORS

60

6.3

SUPPORT TECHNOLOGY LED SOLUTIONS IN HYBRID, HYDROGEN, CARBON CAPTURE AND STORAGE AND CARBON UTILISATION TO DECARBONISE THE ECONOMY AND ENSURE ACCESS TO AFFORDABLE AND RELIABLE ENERGY FOR ALL AUSTRALIANS 

62

ACCELERATE SUPPLY CHAIN DEVELOPMENT AND SME GROWTH 

64

DEVELOP BUSINESS CAPABILITY AND CAPACITY AND SUPPORT INDUSTRY CLUSTERS AND EXPORT HUBS 

66

SUPPORT INDEPENDENT SCIENCE, DATA, R&D AND INNOVATION TO IMPROVE INDUSTRY’S ENVIRONMENTAL, SAFETY AND SOCIAL PERFORMANCE 

70

ESTABLISH AUSTRALIA AS GLOBAL LEADER IN LIFE EXTENSION, REPURPOSING AND DECOMMISSIONING OF ENERGY RESOURCES INFRASTRUCTURE 

72

6.5 6.6

6.7

CONCLUSION 

74

Figures FIGURE 1 - AUSTRALIA’S LNG PROJECTS AND BASINS

24

FIGURE 2 - AUSTRALIA’S NATURAL GAS PRODUCTION (MM3) BY YEAR

24

FIGURE 3 - AUSTRALIA’S CRUDE OIL, CONDENSATE AND LPG RESOURCES (PJ)

26

FIGURE 4 - QUARTERLY COMPOSITION OF AUSTRALIA’S OIL PRODUCTION

27

FIGURE 5 - MAJOR AUSTRALIAN COAL DEPOSITS

29

FIGURE 6 - RENEWABLE GENERATION IN AUSTRALIA BY TECHNOLOGY TYPE (%)

35

FIGURE 7 - GENERATION OF RENEWABLE BY STATE

35

FIGURE 8 - INSTALLED POWER GENERATION CAPACITY BY SOURCE IN THE IEA’S STATED POLICIES SCENARIO, 2000-2040

37

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6.4


01 Foreword The energy sector’s transformation, embracing digital technologies, decarbonising economies and surviving and recovering from the COVID-19 pandemic in 2020

At the time of writing, we are living through a once-in-a-generation global crisis that will undoubtedly result in profound social and structural economic changes. As the COVID-19 pandemic continues to sweep across the globe, previously inconceivable impacts on the movement of people, the way we work and learn, social freedoms, and economies, are emerging day after day. COVID-19 has thrown into sharp relief how false many of our beliefs about markets have been, with what were once seen as seemingly incontrovertible rule books being torn up. Despite our abundant resources and relative isolation, Australia is of course not immune. We have long been a trading nation and have in recent decades embraced the opening of our markets and industries to globalisation and free trade. In the space of just weeks, COVID-19 has emerged as one of the toughest challenges ever faced by our nation – a nation already stressed from the worst bushfire season on record and fatigued from a long-running and bitter political battle about how best to plan for and manage the energy transition and decarbonise the economy. The gravity of the pandemic from a health perspective has necessitated the implementation of widespread measures to slow its spread, and these will continue to exact an unprecedented toll on national, regional and local economies, shutting down entire industries, restricting business activities and creating financial hardship for hundreds of thousands of Australians. The energy resources sector, although familiar with price shocks, is being hit with a severe double blow. COVID-19 restrictions have immediately driven a sharp fall in demand for energy, particularly transport fuels, and in some cases the declaration of force majeure on LNG contracts. At the same time, the oil and gas sector is reeling from plummeting global oil prices as a result of the failure by the Organisation of Petroleum Exporting Countries (OPEC) to reach an agreement to not increase but instead cut production in the face of increased supply and reduced demand.

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Our energy resources sector’s immediate focus has been on significantly reducing personnel to protect the safety and well-being of the essential workforce and ongoing production. Many companies have made announcements to radically scale back non-critical activities and defer or cancel planned capital projects in Australia. Issues are also emerging with prefabrication yards across Asia and longer lead times for bringing in essential supplies through Australian ports. Significant flow-on impacts will be felt across the service sector, and there will inevitably be some market restructure and mergers and acquisitions. The full implications and impacts are still being worked through, but 2020 through 2021 are set to be challenging years for the sector. However, one thing is absolutely clear: access to reliable, secure, affordable and clean energy will remain vital over the short term, but most importantly can play a major role in helping Australia through the recovery phase and into the longer term. This crisis could be the catalyst for a fresh, far smarter and collaborative effort to plan for and manage Australia’s energy transition.


Australia generated

$93.1 billion in gross value add in 2018–19 from combined energy resources

Over

80,000

94,800

NEW JOBS CREATED BY 2030

FULL TIME WORKERS

In our jointly-released 2019 research report Staying Ahead of the Game, NERA and METS Ignited identified

$74 billion in value that could be secured into the Australian economy2

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from the automation of the oil and gas and mining sectors2

directly employed


01 Foreword

In response to the crisis, the Federal Government has committed hundreds of billions of dollars to support Australian businesses and households and prepare our healthcare system to cope with surging demand. This report examines the impacts of the virus on domestic and global energy resources markets and details NERA’s response to support the sector. NERA, as one of six Industry Growth Centres set up by the Australian Government to help secure the nation’s future prosperity, is working to achieve this by diversifying and delivering value to the economy and growing business and job opportunities through the discovery, commercialisation, transfer and deployment of advanced technologies across sectors of competitive or strategic advantage to the nation. Around Australia, Industry Growth Centres are actively collaborating across sectors to accelerate the fast and deep transfer of knowledge and skills to develop technological innovation systems and a vital network of domain expertise and knowledge, demand-driven technological innovation and research. Some of NERA’s industry partners include the Defence Capability Network, the recently established Australian Space Agency, the industry-led research community and other emerging collaboration consortiums including the Sixth Wave Robotics Alliance and Australian Remote Operations for Space and Earth (AROSE). Australia has developed one of the strongest energy resources sectors in the world, built on worldleading innovation. The sector remains one of the principal providers of the energy needed to power the economy and revenue for the nation, including from export income, royalties and supply chain investment. Australia generated $93.1 billion in gross value add in 2018–19 from combined energy resources and directly employs around 94,800 full-time workers. The nation is now the largest LNG exporter in the world, with each direct job in the oil and gas industry supporting ten additional jobs across the supply chain and the wider economy, highlighting industry’s long investment in and high value of leading technology, but also, critically, the huge opportunity and threat that will arise from the growth or decline in further investment in the sector and in leading technologies.1 Whilst NERA’s focus is on Australia’s energy resources sector, increasingly it is the rapid discovery and sharing of knowledge, technologies and innovative solutions between leading industries such as space, energy resources and mining, emergency services, agriculture, MedTech and defence, that will be critical to maintaining Australia’s global competitiveness, creating market scale for local supply chains and longterm prosperity for all.

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The digital transformation of Australia’s economy requires strategies that support collective

The digital transformation of Australia’s requires experimentation, continuous learning and adaptationeconomy and a multi-pronged approach across key sectors. strategies that support collective experimentation, continuous learning and adaptation and a multi-pronged approach across key sectors. To address this opportunity and threat, and maintain our global leadership position, the sector is working to both secure future investment in the vital energy resources needed to power the economy and support, accelerate and invest in digital and low-emissions technologies. In our jointly-released 2019 research report Staying ahead of the game, NERA and METS Ignited identified $74 billion in value that could be secured into the Australian economy and over 80,000 new jobs created by 2030 from the automation of the oil and gas and mining sectors.2 This highlights the magnitude of the growth opportunity for the national economy. In recent times, the ubiquity of wireless systems, access to cloud computing and solutions such as artificial intelligence and machine learning have enabled an additional layer of insights to be brought into the energy resources sector. It is now easier and more affordable to gather information and transform data into valuable insights, allowing facility operators to improve their safety, operations and maintenance. Cross-industry and cross-sector collaborations open a much-needed opportunity to build market scale for local supply chains. Digital technologies also enable these local supply chains, providing simulated and test lab environments to trial, prototype and certify innovative technologies in safe environments. An example is the University of Western Australia Industry 4.0 Test Lab partnership with the energy resources sector to solve integrated data problems, drive more efficient operations and maintenance and ultimately improve productivity.


Support for and investment in low-emissions technologies will also be required to address climate change and assist Australia to meet its carbon emissions reduction targets. As the World Economic Forum has stated:

Energy is the lifeblood of the global economy – a crucial input to nearly all of the goods and services of the modern world. Stable, reasonably priced energy supplies are central to maintaining and improving the living standards of billions of people...

72% OF GLOBAL MANMADE GREENHOUSE GAS EMISSIONS

are from the energy sector – from generation of electricity and heat, transportation, manufacturing and construction and other fuel combustion3

However, the International Energy Agency (IEA) reported that around 72 per cent of global manmade greenhouse gas emissions are from the energy sector – from generation of electricity and heat, transportation, manufacturing and construction and other fuel combustion.3 There is no more contentious a global issue than climate change and how to navigate the energy transition. For Australia, navigating this transition is proving especially challenging given that our economy, jobs, export income and prosperity have been so tightly interlinked with our abundance of resources. Despite this, solutions are emerging globally and locally. Australia has world-leading technical, engineering and innovation capabilities from decades of investment in the resources and oil and gas industries. Australia also has abundant cleaner energy resource alternatives, and the technologies needed to support them are developing. Leveraging our existing capabilities could see Australia and the world build a sustainable, high-tech and low-carbon future. Our sector can and must bring its enormous capabilities and experiences to the table and play a central role in transitioning towards a digital technology and low-carbon future. Our challenge for this new energy decade is to create the conditions necessary for new technologies to form, grow and be deployed widely in far shorter timeframes and in more agile ways than in the past. Considering the present challenges facing our nation, all industry sectors must recognise that this cannot be a period of business-as-usual. Sharing knowledge, technologies and innovative solutions across leading industries will be critical to sustaining Australia’s global competitiveness, creating market scale for local supply chains and long-term prosperity for all. In this current climate of uncertainty and instability, it has never been more vital to sustain innovative, resilient, adaptive and globally competitive critical industry sectors.

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Approximately


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NERA’s vision is Australia as a global energy powerhouse, a sought-after destination for investment and the leading source of knowledge and solutions.

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NERA’s Innovation Blueprint


Australia’s Future Prosperity Australia’s future prosperity will depend on the ability of industry to be globally competitive and grow, which in turn requires structural change to the economy and developing our R&D, innovation and invention into scalable, commercial and high value outcomes. The Industry Growth Centres are collectively working to transform innovation across Australia’s top industry sectors, to secure a technology led and prosperous future for the benefit of all Australians.

NERA’s Role NERA’s role is to transform the innovation culture across Australia’s energy resources sector by optimising today and adapting for tomorrow. We are working to identify and overcome barriers and constraints to commercialising innovation and to strengthen the innovation ecosystem – with a focus on AI, automation and robotics and low emissions technologies.

Knowledge Priorities 1

Enhance skills and business capabilities to support automation and digitisation

2

3

Build talent and enable effective collaboration and innovation

4

Pursue a sustainable and low carbon energy future

Understand and unlock Australia’s resources base

NERA Strategies 1

2

3

Discover digital and technology solutions to industry’s challenges through collaborative industry-led programs designed to commercialise and apply R&D and innovation

Drive collaboration across industry sectors e.g. for remote operations, across the mining, oil and gas, space and agriculture sectors

Support technology led solutions in hybrid, hydrogen, carbon capture and storage and carbon utilisation to decarbonise the economy and ensure access to affordable and reliable energy for all Australians

Sector Transformation Policy Impact

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Collaborative, industry-led and applied R&D and Innovation; leading to commercial and high value outcomes, particularly for AI, automation and robotics and low carbon technologies.

Growth of SMEs with the entrepreneurial, business and technological capabilities and capacities to supply advanced technologies and services to end users; leading to their integration into local supply chains, diversification of Australia’s economy, higher value generated and skilled jobs created.

Our collaborative work in action Exmouth Integrated Artificial Reef NERA brought industry operators, innovators, community members and researchers together to form the “King Reef” project that has created the largest integrated artificial reef in the southern hemisphere constructed in part from repurposed oil & gas infrastructure. It’s the first of its kind in Australia and is enhancing marine habitats and creating local employment and business growth opportunities in regional communities. It is also demonstrating one potentially viable decommissioning strategy to industry and government and can open up new possibilities to add to existing decommissioning avenues, creating a new market and business model for local companies.

SPEE3D NERA has collaborated with technology innovator SPEE3D, Charles Darwin University and ConocoPhillips to develop a new highspeed, low-cost metal 3D printing technology. The technology can operate around 1,000 times the speed of conventional metal 3D printing at a fraction of the cost and has the potential to revolutionise industrial activities in remote areas by allowing onsite metal part production and removing the costly delays involved with sourcing materials from far afield. With NERA’s help, SPEE3D’s technology has already crossed into other industries including defence and space, to help other sectors solve complex problems using Australian owned and developed technology.


NERA’s Innovation Blueprint They are achieving this through increasing collaboration and commercialisation, growing international market opportunities, enhancing management workforce skills and identifying regulatory reforms.

Our strategy must be adaptive by necessity to maintain Australia’s leadership position in highly competitive and evolving global energy markets.

6

Develop new market and business models

7

Commercialise technology and research

4

5

Accelerate supply chain development and SME growth

Develop business capability and capacity and support industry clusters and export hubs

More local businesses integrated into global supply chains and markets, leading to new jobs and export income.

8

Enhance efficiency in operations and maintenance

6

Support independent science, data, R&D and innovation to improve industry’s environmental, safety and social performance

Access by industry to a skilled workforce that has the core skills required to enable them to adapt to a rapidly changing technology world; leading to improved ability of industry to innovate and driving business productivity and competitiveness.

AROSE NERA has partnered with the Australian Remote Operations for Space and Earth (AROSE) consortium to help leverage Australia’s world-leading capabilities in remote operations, AI, machine learning and automation to create new markets and build scale between the energy resources sector and emerging global space industry. NERA’s support is helping AROSE map Australia’s current technology capabilities and identify opportunities to position Australia as a future hub and exporter of remote operations technology solutions for space, while driving the cross-sector exchange of technology to continue to drive productivity increases for resources industries around the country.

Optimise the regulatory framework

7

Establish Australia as a global leader in life extension, repurposing and decommissioning of energy resources infrastructure

Regulatory reform to support the aforementioned outcomes, leading to improved global competitiveness and attraction of investment.

Hydrogen Industry Cluster NERA is leading the development of a new hydrogen industry cluster strategy to position Australia as a global force in the emerging hydrogen economy. The Hydrogen Industry Cluster will drive crucial collaboration across the emerging hydrogen value chain, building the scale and capabilities of existing industry start-ups, scale-ups and SMEs and further leveraging and developing their technologies that will sustain a clean, innovative, competitive and safe hydrogen industry. The Cluster will also connect its members with leading Australian research organisations, supporting the commercialisation of their IP in Australia, creating high value jobs, securing investment and ultimately supporting hydrogen exports driven by a world-leading hydrogen supply chain of technology solutions and services.

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5


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Impacts of the coronavirus and our response to support the sector

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03


03 Impacts of the coronavirus and our response to support the sector In most economies that have implemented strong confinement measures, electricity demand has declined by around

15% The IEA has forecast that oil and gas income for some key producers would fall between

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50-85% in 2020, compared with 2019

Economic and societal impacts A novel coronavirus (now known as COVID-19) was first reported to the World Health Organisation (WHO) on 31 December 2019. Although originating in China, the outbreak of the virus has expanded and is a rapidly evolving challenge with significant health impacts. The spread of the virus worldwide has broadened and may be prolonged. Both international and domestic governments are implementing a range of mitigation measures to slow the spread of COVID-19, including social distancing, self-isolation and quarantine, travel restrictions, and closure of education institutions and non-essential industries. These measures are having significant economic and societal impacts. The Chinese economy has been severely disrupted by the virus, experiencing a record fall in manufacturing activity along with decreased industrial production and significant trade disruptions during the first quarter of 2020.4 Given China’s interconnectedness with Australian and global markets, and its central role in supply chains, this decline will have flow-on economic ramifications for the world. The impact of the outbreak has quickly evolved to other countries and regions, and international economic outlook has worsened as the coronavirus has spread.5 Major economies including the United Kingdom, Italy and Spain have enacted “lockdowns” to contain COVID-19, which is restricting the movement of people and supplies and is expected to hinder economic activity over coming months. Considerable uncertainty remains around the economic implications of the virus for the June quarter and beyond, though the global economic impact will undoubtedly affect demand for Australia’s energy exports.6

Impacts on Global Energy Markets Macro-level perspective In the energy sector, COVID-19 is affecting oil, gas, coal, and renewables markets, which is certain to have strong implications for Australian and overseas suppliers. Global oil and gas markets are facing an unprecedented situation, with demand collapsing due to the impacts of the virus, while the already overabundant supply is significantly increasing. In most economies that have implemented strong confinement measures, electricity demand has declined by around 15 per cent, largely as a result of factories, businesses and education institutions curtailing operations.7 Decreased demand in oil markets has primarily arisen from the range of confinement measures implemented to slow the spread of the virus, which are reducing demand for transport fuels. Oil prices have reached 18-year lows as a result of falling global demand and the collapse of an agreement between major producers to reduce output.8 The IEA has forecast that oil and gas income for some key producers would fall between 50 per cent and 85 per cent in 2020, compared with 2019.9 A decrease of this magnitude would represent the lowest income levels in over two decades. International gas markets have been hit by declining oil-linked LNG export prices, and the effects of efforts to contain the spread of the virus could be considerable. COVID-19 has reduced gas demand in China particularly for LNG imports – China is Australia’s second largest LNG export market.10


36% due to the rapid depreciation of local currencies in these countries 16

Whilst the full extent of the impact on global gas demand is not yet clear, early figures from Italy (the first European nation to impose far-reaching measures to curb the spread of COVID-19) show a ten per cent to 21 per cent reduction in peak demand and energy use in March 2020 – electricity is mainly produced from natural gas in Italy.11 Gas consumption has decreased for domestic users, small businesses, education institutions and the power sector, while industrial demand has remained relatively stable as large industries continue to operate for the moment.12 The emergence of similar trends in Asia would be highly detrimental to Australian suppliers, who have already commenced cutting operational costs and placed major growth projects on hold. A reduction in electricity consumption in commercial and industrial operations is also likely to hurt global coal demand this year, though the extent of the impact will become clearer in the coming months. Reduced economic activity in China as a result of COVID-19 led to a fall in demand for thermal coal in the first quarter of 2020.13 In the United States, domestic demand for thermal coal is forecast to decline in the June quarter, with much of the industrial economy shutting down in an attempt to slow the coronavirus pandemic, with diminished economic activity reducing electricity demand.14 Similar trends are emerging globally, foreshadowing decreased demand for Australian exports. As the situation is still unfolding, there is a high degree of uncertainty around the extent of impacts to the industry in the nearterm. Clean energy transitions are also being affected by falling power demand, with forecasts indicating that projected growth in newly commissioned solar and wind projects will be cancelled out for 2020 and reduced by a further ten per cent next year due to coronavirus and contraction of currencies across the globe.15 Renewable projects in Australia will be especially impacted, as projects in the procurement phase could face capital cost increases of up to 36 per cent due to the rapid depreciation of local currencies in these countries.16 The IEA predicts that falling oil and gas prices will place downward pressure on the economics of renewable sources in the short-term, and without policy support, some renewables that have seen rapid deployment may be displaced to cheap hydrocarbons and fossil fuels.17

Response from the energy resources and mining sectors NERA has partnered with METS Ignited and industry researchers State of Play to conduct a weekly global survey of mining and energy resources executives to understand the impacts of COVID-19 and how businesses around the world are responding to associated challenges.18 Interim results from week two of the study found that: • Resources executives are highly concerned about the virus and its effect on personal and professional contexts (94 per cent), with 87 per cent reporting an increase in concern over the past week. • Impacts on businesses have been profound, with 80 per cent reporting significant or strong impacts and three per cent already experiencing business closures as a result of the crisis. The most common impacts on businesses include revenue loss, business model disruption, loss of profits, frustrated contracts, supply chain disruption and employee unavailability. • A range of measures are being deployed to ensure employee safety and maintain safe operations amid the crisis. The most common being travel restrictions, cancellation of all external meetings, remote work, and postponement of all non-critical activities. • Organisations are in a vulnerable position, with only 30 per cent reporting that their business can sustain operations under the current operating conditions for more than six months, and just three per cent believing that they can sustain current operations for 12 months or more. This highlights the rapidly evolving nature of the situation, as just one week prior to this, 35 per cent of executives considered their current operating situation to be sustainable for more than a year. • Many executives feel that the pandemic will be a catalyst for lasting changes to their operating models and industries, with technology developments enabling businesses to become more autonomous and remotely operated, and processes and practices implemented to enhance resilience to unforeseen risks and challenges.

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Renewable projects in Australia will be especially impacted, as projects in the procurement phase could face capital cost increases of up to


03

To slow this impact, the Federal Government has pledged a total of approximately

$320 BILLION

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in stimulus packages to support individuals and households, support businesses, and support the flow of credit

Impacts of the coronavirus and our response to support the sector

NERA’s Response to COVID-19 As the COVID-19 pandemic gathers momentum and the level of concern grows across the world, NERA is mobilising its resources and leveraging its extensive network of connections to support Australia’s energy sector operators, supply chain and community to continue functioning as best they can within the restricted parameters of this global crisis. Smaller businesses in the supply chain are particularly vulnerable to the fragile economic situation, and with considerable small business closures already occurring across hospitality, retail, tourism and service sectors, Australia is on the brink of a major economic and social depression. To slow this impact, the Federal Government has pledged a total of approximately $320 billion in stimulus packages to support individuals and households, support businesses, and support the flow of credit. State and territory governments are also supporting small businesses and entrepreneurs to continue operating and ultimately keep people in jobs. Throughout this period of economic and social uncertainty, it is more important than ever that we connect and collaborate to support Australian citizens and businesses to navigate these challenging times. NERA’s COVID-19 response aims to:

1

Build business and community resilience and reduce the impact of business closures and job losses.

2

Connect businesses within our ecosystem to other support resources and packages.

3

Sustain a strong and resilient supply chain to promote innovation and provide financial assistance for solutions, technology and knowledge that may help address challenges associated with COVID-19.

4

Build resilience in a supply chain that is agile, dynamic and is prepared for when the crisis eases.

Industry Growth Centre collaboration NERA is collaborating with fellow Growth Centres – MTP Connect, Advanced Manufacturing Growth Centre (AMGC), METS Ignited, AustCyber and the Food and Agribusiness Growth Centre (FIAL) – to align our collective resources, skills and networks to help address some of the major societal and economic challenges that Australia faces as a result of COVID-19. Growth Centres are exchanging information to identify priority areas of focus in order to direct resources to urgent and high-impact matters and avoid duplication of effort. As an example, MTP Connect and AMGC are providing guidance on high-demand items within the health sector. Growth Centres, including NERA, are seeking expressions of interest for funds to support businesses within our sector who can apply or redeploy their technology to provide a solution to a COVID-19 related challenge. Based on this information exchange, Growth Centres will direct support to where it is most needed. In addition to eliciting cross-sector solutions to key societal challenges, Growth Centres are sharing information and action plans on how we intend to engage, support and build the resilience of our respective sectors during this trying time. Collaboration in this respect will enable learnings and best practice initiatives to be shared and leveraged across Australia’s top sectors.


NERA’s COVID-19 Resource Hub NERA has launched a COVID-19 Resource Hub (nera.org.au/covid-19-hub), which provides a centralised repository for organisations to access information, resources and connections. The hub has been developed to: • Release our ‘COVID-19 Innovation Challenge Funding Round’ to support local innovators to rapidly develop new solutions to the challenges we face as a result of the COVID-19 outbreak.

• Stay connected. NERA will deliver online content including webinars and virtual workshop initiatives through our channels. In addition, we will share more of our energy innovators’ stories to showcase the achievements of the energy resources ecosystem across the nation. • Provide supply chain opportunities through the Australian Technology Catalogue to connect local energy resources businesses with global markets.

Supporting innovative solutions to combat the impacts of COVID-19 Innovation, technology and agility are pivotal at this time of crisis, from treating and testing at the front line, to how we interact, socialise, work and educate as the world goes into lockdown. In early April 2020, through the COVID-19 Resource Hub, NERA collected expressions of interest for financial support from innovative energy resources supply chain businesses that are looking to assist in developing technology solutions that will address societal challenges that have arisen due to the COVID-19 outbreak. We requested expressions of interest from businesses that: • May be able to assist with the supply of goods, services, knowledge or expertise to address challenges associated with the current COVID-19 outbreak in Australia; • May be able to provide technology solutions to support virtual learning and remote work for circumstances of lockdown; or • Require financial support to continue their development of an innovative product or service during these unprecedented times. NERA has provided support to ten SMEs who have a viable solution that may enhance Australian efforts to combat challenges associated with the COVID-19 outbreak and the flow-on impacts on society. SPEE3D and MyPass Global are two of the ten NERA-supported companies that serve as early examples of innovative Australian businesses that are applying their knowledge and technology to assist during the COVID-19 outbreak. Victorian-based company SPEE3D has modified its world-leading 3D printing technology to rapidly produce copper-coated door push plates for use in hospitals and other public places with door handles, rails and other touch surfaces to follow. Copper is proven to have antimicrobial contact killing properties. NERA is supporting SPEE3D to conduct clinical trials on ACTIVAT3D copper with virology lab (3DBiolabs) and complete field testing of the application at a suitable facility (e.g. hospital, school or government asset). The results and learnings from the case study will be freely published so that, if successful, the solution may be applied more broadly. SPEE3D initially sought State Government funding to support the project, though due to formal approval processes, funding could not be delivered within the necessary timeframe to commence this time-sensitive project. Operating under an agile Industry Growth Centre model, NERA took prompt action to support the project, enabling research to commence immediately.

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nera.org.au/covid-19-hub

• Support smaller businesses to build resilience by sharing the range of support opportunities available to Australian SMEs, innovators, entrepreneurs and sole traders working in the energy resources sector.


03

Impacts of the coronavirus and our response to support the sector

Innovative Western Australian business MyPass Global is enabling energy resources companies to maintain business continuity amid COVID-19 through ensuring that essential workers can continue to access facilities whilst mitigating the risk of COVID-19 transmission. Through NERA’s support, MyPass is expanding the functionality of their existing MyPass digital work passport to include critical COVID-19 eLearning training, self-declaration forms, essential worker status, test results and immunisation records. This solution will reduce current inefficiencies associated with either tracking COVID-19 status via paper forms, spreadsheets, and/or standalone internal portals and will provide a single source of truth record for all workers, allowing tracking of COVID-19 training and declaration validity. Australian energy companies will be offered free access to their own MyPass dashboard portal to manage their worker pools. Santos is an early adopter of this solution and has committed to rolling it out across its onshore operations, with NERA’s support enabling the rapid onboarding of workers to ensure business and employment continuity.

Building business resilience NERA aims to build business resilience in the face of the COVID-19 outbreak through:

1

2

3

Directing businesses to critical information and resources that will support their survival.

Providing a platform for businesses to connect with opportunities.

Preparing businesses for the future through building skills and capability.

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Through the COVID-19 Resource Hub, NERA is sharing a range of support opportunities available to Australian SMEs, innovators, entrepreneurs and sole traders working in the energy resources sector. This includes links to appropriate Federal Government business assistance measures, State Government assistance packages, direction to useful financial and emotional support resources, and guidance on common challenges that employees and organisations are encountering. NERA established multiple pathways for Australian businesses to connect with supply chain opportunities. This includes: • Providing access to funds for innovative SMEs via our ‘COVID-19 Innovation Challenge Funding Round.’ • Enabling SMEs to showcase products to a global energy resources marketplace free-of-charge via the Australian Technology Catalogue, and subsidising additional premium features for selected SMEs to enhance the deployment of technology (see next page - Supporting supply chain opportunities) • Delivery of a series of webinars and virtual workshops to encourage and support SMEs to effectively adapt to and navigate challenges that have arisen from the COVID-19 outbreak and develop key skills and capabilities to facilitate future success.


Connecting Australia’s energy resources sector Throughout this time where people and businesses are more isolated than ever, NERA will implement a range of initiatives to maintain a strong sense of community within the energy resources sector and provide opportunities for people and organisations to connect and share information. Over the coming months, NERA will continue sharing industry developments through our online channels as well as publishing energy innovators’ stories to keep the sector informed of what Australia’s energy ecosystem is achieving and how some businesses are responding to the COVID-19 outbreak by, for example, adapting their offerings, returning to previously ‘shelved’ ideas, or adjusting their business models. In addition to this, we will connect the sector through our delivery of thought leadership and skills development webinars and virtual workshop initiatives.

Supporting supply chain opportunities The Australian Technology Catalogue (nera.technologycatalogue.com) is an online platform that connects homegrown technologies with local and overseas operators and end-users across the energy resources sector. Australian suppliers rely on international exhibitions, conferences and trade shows to promote their technologies in overseas markets. With these opportunities cancelled or postponed in 2020, the Australian Technology Catalogue enables innovators to connect with potential customers and showcase their technologies at a time where access to new customers and markets is limited. NERA established the Australian portal of the Technology Catalogue in partnership with Deployment Matters in 2019, and through NERA’s support of the platform, innovative Australian businesses can share their products with global energy resources markets at no cost.

NERA will support

20 SMEs

who subscribe to the online marketplace with additional premium support services

To further assist Australian suppliers to connect with international supply chains, NERA will support 20 SMEs who subscribe to the online marketplace with additional premium support services (that usually incur a fee) without charge. These premium support services will enhance the deployment of SME technology to markets and include: • A free ‘online pitch’ webinar to showcase each SME’s product offering to end-users, enabling them to promote their technology to end-users in the global energy resources sector. • Free access to data analytics on the platform, providing SMEs with an analytical dashboard to track visits to their product page and identify prospective leads. • A free online coaching session to support SMEs to prepare for their online pitch webinar, with guidance on their pitch and product can be best presented from an end-user perspective. • Free Technology Stress Tests for up to ten SMEs. The Technology Stress Test contains a structured dialogue of approximately 30 criteria to diagnose and address technology deployment pain points. It will assess the effectiveness of each business’ technology deployment strategy and provide guidance on how best to position their technology for success.

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nera.technologycatalogue.com


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Economic developments in the energy resources sector

| 21 | National National Energy EnergyResources ResourcesAustralia Australia– –Sector SectorCompetitiveness Competitiveness Plan Plan 2020 2020

04


04 Economic developments in the energy resources sector TOTAL

$93.1 billion

Australia has a large, diverse base of energy resources that support domestic consumption and energy exports to much of the world. The Australian energy resources sector generated $93.1 billion in gross value added (GVA) in 2018–19, a 22 per cent increase from $76.6 billion in 2017–18. This was almost entirely driven by the oil and gas and coal industries. The energy resources sector directly employed 94,800 full-time workers in 2018–19, down five per cent from 99,700 in 2017–18.

GROSS VALUE ADD*

DIRECT EMPLOYMENT**

GROSS VALUE ADD OIL AND GAS

$42.1 billion

94,800 jobs

PETROLEUM EXPLORATION

$0.6 billion

DIRECT EMPLOYMENT

PIPELINE AND TRANSPORT

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$0.5 billion THERMAL AND METALLURGICAL COAL MINING

$47.6 billion PETROLEUM AND COAL PRODUCTION MANUFACTURING

$2.1 billion URANIUM***

$0.2 billion

25,400 jobs 4,700 jobs 700 jobs 54,500 jobs 7,300 jobs 2,200 jobs

NOTES *

GVA in current prices, $AUD 2018-19 Source: ABS (2018-19) Australian System of National Accounts, Catalogue no. 5204.

** Four-quarter average to May 2018-19. Not further defined (nfd) employment apportioned to relevant categories. Rounded to nearest 100. This does not include employment through the value chain, e.g. contractors/service/technology sector supporting energy resources. Source: ABS (Nov 2019) Australian Labour Market Statistics, cat. no. 6291.0.55.003. *** Source: IBISWorld Industry Report B0808: Uranium, Mining in Australia


The oil and gas industry contributed

$42.1 billion

Australia’s energy production increased by four per cent to reach an all-time high of 18,603 petajoules (PJ) in 2017–18.19 With more than three-quarters of Australian energy output produced for export, the sector serves as a key source of revenue for the nation’s economy20 as well as a trusted supplier to global markets. Domestic energy consumption also rose by 0.9 per cent to reach a record high of 6,172 PJ in 2017–18. While Australia has plentiful and widely distributed wind, solar, geothermal, ocean and bioenergy resources, non-renewable fuels account for 94 per cent of the nation’s energy mix. Oil accounts for 39 per cent of domestic energy consumption, ahead of coal (30 per cent), natural gas (25 per cent) and renewables (six per cent).21

IN GVA

to the Australian economy in 2018–19, a 19% increase on 2017–18

4.1 Australia’s Oil and Gas Industry The oil and gas industry contributed $42.1 billion in GVA to the Australian economy in 2018–19, a 19 per cent increase on 2017–18.22 Increased production from new liquified natural gas (LNG) facilities was the primary driver of this growth, with increased condensate and liquified petroleum gas (LPG) production more than offsetting declining crude oil production. Australia’s oil and gas industry directly employs 25,400 people. Further to this, every job in the industry supports another ten jobs elsewhere in the economy.23

4.2 Gas and Liquified Natural Gas (LNG)

AUSTRALIA RANKED

1st IN GLOBAL LNG EXPORTS FOR 2019

LNG EXPORTS Volume:

LNG PRODUCTION (BCM)

74.8 Mt Value:

$51 billion

145.2

LNG SUPPLY CAPACITY

159.0

120.3

45% 35%

57% 28%

2017 -18

TOP 5 EXPORT MARKETS (BY EARNINGS)

2018 -19

2019 -20

WA

Source: Resources and Energy Quarterly, Office of the Chief Economist, Canberra, March 2020.

QLD

15%

11%

NT

rea

Jap

an

Ch

ina .Ko S

Tai

5% w

an

2% Ind

ia

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Industry overview


04 Economic developments in the energy resources sector

Supply Australia’s LNG industry is clustered in three areas – Karratha and Onslow in Western Australia’s Pilbara region, Darwin in the Northern Territory and Gladstone in Queensland. Over half of Australia’s LNG export capacity (both existing capacity and capacity under construction) – around 50 million tonnes per annum – is located in Western Australia, while Queensland contributes about 25 million tonnes per annum of nameplate capacity, followed by the Northern Territory with 13 million tonnes per annum (see Figure 1).

Figure 1 - Australia’s LNG projects and basins

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Production Australia’s natural gas production reached a record high of 145.2 billion cubic metres (Bcm) in 2018–19 (see Figure 2), a 20.7 per cent increase from 120.3 Bcm in 2017–18, and is forecast to increase by a further 9.5 per cent to 159 Bcm in 2019–20.24 The Wheatstone and Ichthys LNG projects have been key drivers of production growth. Wheatstone began producing at full capacity in the second half of 2018, whilst production at Ichthys commenced in July 2018 and has ramped up ahead of schedule. At present, around 71 per cent of Australia’s natural gas output is for export.25

Figure 2 - Australia’s natural gas production (Mm3) by year 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

Source: Australian Petroleum Statistics, Department of the Environment and Energy, Canberra, 15-01-2020.

2018-19


Trade Australia was the world’s largest exporter of LNG in 2019, the first time the nation has topped the global LNG export list on a sustained annual basis. Australia shipped an estimated 77.1 million tonnes of LNG, worth $51 billion in real terms, up from $31.6 billion in 2017–18. Qatar was displaced from the top spot, with an estimated 75 million tonnes of LNG exported in 2019. Export volume is forecast to increase by seven per cent to 80.3 million tonnes in 2019–20 as the Prelude (WA) and Ichthys (NT) projects ramp up, and is expected to hold steady in 2020–21. Despite projected growth in export volume, the value of Australia’s LNG exports is forecast to decline through to 2020–21 due to plummetting oil-linked contract prices (at which most Australian LNG is sold). At the outset of 2020, LNG export revenue of $44 billion was forecast for 2020–21.26 However, due to the significant impacts of COVID-19 and a major supply overabundance, revised estimates in April 2020 indicate that Australia’s LNG export revenues could drop as low as $30 billion in 2020–21.27

Project Pipeline There are a number of projects in the pipeline that could see Australia’s LNG export capacity rise in the next decade. Gas and LNG project developments in 2019 included the public announcement of eight projects, whilst 16 underwent feasibility assessment, five were committed, and the Arcardia (Bowen Basin, QLD), Project Atlas (Surat Basin, QLD), and Sole (Gippsland Basin, VIC) projects reached completion. Maintenance works at Gorgon reduced Australian LNG export volumes in the December 2019 quarter, and further maintenance scheduled for mid-2020 will again interrupt production. In response to the emerging COVID-19 outbreak, several Australian upstream LNG operators have placed major growth projects on hold and significantly reduced investment cash. This includes Woodside placing major growth projects worth more than $53 billion on hold;28 Santos cutting capital expenditure in 2020 by $550 million and deferring a decision on their Barossa project;29 and Beach Energy deferring up to 30 per cent of capital investment in 2020–21.30

Global Outlook A ramping up of export capacity and slower demand growth in Asia created a surplus environment within the LNG market in 2019. A similar scenario is expected in 2020, with the United States, Australia and Russia set to increase production capacity. Weak demand, however, has been further exacerbated in the first quarter of 2020 by the early impacts of COVID-19 in China, particularly for LNG imports – China is Australia’s second largest LNG export market.31 Further to this, international gas markets have been hit by declining oil-linked LNG export prices and the effects of efforts to contain the spread of the virus could be considerable. In most economies that have implemented strong confinement measures, electricity demand has declined by around 15 per cent, largely as a result of factories, businesses and education institutions ceasing operations.32 Whilst the full extent of the impact on global gas demand is not yet clear, early figures from Italy (the first European nation to impose far-reaching measures to curb the spread of COVID-19) show a ten per cent to 21 per cent reduction in peak demand and energy use in March 2020 – electricity is mainly produced from natural gas in Italy.33 Gas consumption has decreased for domestic users, small businesses, education institutions and the power sector, while industrial demand has remained relatively stable as large industries continue to operate for the moment.34 The emergence of similar trends in Asia would be highly detrimental to Australian suppliers, who have already commenced cutting operational costs and placed major growth projects on hold. In the mid-term, Qatar is expected to secure the position as the world’s top LNG exporter by the late2020s. Qatar Petroleum announced plans in late 2019 that would increase Qatar’s LNG production capacity by 64 per cent to 126 million tonnes by 2027. The long-term outlook for the international gas market varies significantly depending on the mix of global policy frameworks implemented over the next 20 years. The IEA’s World Energy Outlook 201935 predicts gas demand to grow by over a third by 2040 under the Stated Policies Scenario (based on existing policy frameworks and announced policy intentions), whereas demand for gas would experience moderate growth to 2030 before reverting to present levels by 2040 under the Sustainable Development Scenario (based on policies required to achieve UN Sustainable Development goals).


04 Economic developments in the energy resources sector

4.3 Oil, Condensate and Liquified Petroleum Gas (LPG) Resources Industry overview

TRENDS

EXPORTS (A$B)

• Condensate, LPG exports rising

Crude and condensate only

• Crude exports lowest in decades

6.9 2017 -18

9.2

2018 -19

PRODUCTION (KB/D)

10.5

2019 -20

521 336

2018 -19

Around

two-thirds

406

2017 -18

SUPPLY CAPACITY

2019 -20

of crude and condensate production comes from Carnarvon Basin, WA.

TOP 5 EXPORT MARKETS (BY EARNINGS) 21% 14% 13% a . pe U.S Euro Chin

5% Ind

ia

4% Jap

an

Source: Resources and Energy Quarterly, Office of the Chief Economist, Canberra, March 2020.

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Supply Most of Australia’s known oil resources are associated with giant offshore gas fields in the Carnarvon, Browse and Bonaparte Basins, with around two-thirds of Australia’s crude and condensate production currently sourced from the Carnarvon Basin, offshore in Western Australia. Oil resources have also been identified in the Perth, Canning, Amadeus, Cooper/Eromanga, Bowen/Surat, Otway, Bass and Gippsland Basins (see Figure 3).

Figure 3 - Australia’s crude oil, condensate and LPG resources (PJ)


Production Australian production of crude oil peaked at just under 700,000 barrels/day in 2000, prior to a sustained period of decline. Crude production averaged 108,000 barrels/day in 2018–19, representing the lowest annual level since 1969–70. Crude production is set to marginally increase over the next two years as the Greater Enfield project reaches peak production, before declining through to 2024–25. No new projects are expected due to low global oil prices and Equinor’s decision in February 2020 to discontinue their exploration drilling plan in the Great Australian Bight. Australia’s condensate and LPG production continues to grow and in recent years has more than offset declining crude oil production. Growing condensate output is expected to drive Australia’s petroleum production and export earnings over the next three years. Condensate production increased by 52 per cent in 2018–19 (see Figure 4), driven by output from new offshore LNG projects.36 Whilst growth has slowed, condensate production is forecast to increase at an annual average rate of 3.5 per cent through to 2024–25.37

Figure 4 - Quarterly composition of Australia’s oil production CRUDE OIL

600

CONDENSATE

500 400 300 200 100 0 2004-05

2009-10

2014-15

2019-20

2024-25

Source: EnergyQuest (2019); Australian Petroleum Statistics (2019); Department of Industry, Innovation and Science (2019).

Trade Australia currently exports around 84 per cent of crude oil output, primarily due to the qualities and characteristics of Australian oil better suiting export markets than the Australian refinery market and the close proximity of south-east asian refineries to oil fields on the west coast of Australia.38 Singapore, Malaysia and Thailand were the largest recipients in 2018–19. Despite a sustained decline in crude production, earnings from crude and condensate rose by 31 per cent to $9.2 billion and are forecast to peak at $11 billion in 2020–22, before declining to a projected $9.6 billion in 2024–25.39

Project pipeline A total of five major petroleum projects reached completion in Australia over the past five years, including the $2.6 billion Greater Enfield Expansion in 2019. The Buffalo project in the Bonaparte Basin was announced during 2019, while the West Seahorse Project in Gippsland is undergoing feasibility assessment. Petroleum exploration rose from AU$1.0 billion in 2017–18 to AU$1.3 billion in 2018–19, ending a sixyear decline. Both offshore and onshore petroleum expenditure are approaching decade lows. There were some signs of recovery in late 2019, though the emergence of COVID-19 has forced upstream producers to shelve major growth projects and cut investment spending in 2020. Santos, Beach Energy, Chevron, BP and Shell are some of the many operators who have already announced project postponements and spending cuts both in Australia and overseas.

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LPG


04 Economic developments in the energy resources sector

Global outlook Global oil production decreased in 2019, though is forecast to grow over the next two years, primarily due to higher output from the United States. Oil consumption growth fell marginally in 2019 as a result of lower consumption from Organisation for Economic Co-operation and Development (OECD) countries, with non-OECD countries (particularly China and India) accounting for nearly all growth in world oil consumption. Consumption growth in 2020 is expected to be constrained due to measures taken to limit the spread of COVID-19, which are restricting global air and vehicular travel. The COVID-19 outbreak significantly affected oil prices in the first quarter of 2020, with prices reaching an 18-year low. In the IEA’s March 2020 oil market forecast, the central base case predicts a decrease in global oil demand in 2020 for the first time since 2009, driving a significant contraction in oil consumption in China, and major disruptions to global travel and economic activity.

The IEA now sees global oil demand at 99.9 million barrels a day in 2020, down around 90,000 barrels a day from 2019. This is a sharp downgrade from the IEA’s forecast in February, which predicted global oil demand would grow by 825,000 40 barrels a day in 2020. The IEA has forecast that oil and gas income for some key producers would fall between 50 per cent and 85 per cent in 2020, compared with 2019.41 A decrease of this magnitude would represent the lowest income levels in over two decades.

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The long-term outlook for oil demand and supply varies widely depending on the future implementation of global policy frameworks. The IEA’s World Energy Outlook 201942 forecasts growth based on three scenarios:

1

Current Policies Scenario

(based on existing policy frameworks) Global oil consumption continues to rise, reaching 121 million barrels per day in 2040.

2

Stated Policies Scenario

(based on existing policy frameworks and announced policy intentions) Oil consumption grows by ten per cent to reach 106 million barrels per day in 2040. Consumption does not peak before 2040, although growth rate slows considerably after 2025.

3

Sustainable Development Scenario

(based on policies required to achieve UN Sustainable Development goals) Consumption begins decreasing over the short-term and falls dramatically to 67 million barrels per day by 2040.


4.4 Thermal Coal Industry Overview

AUSTRALIA RANKS

2nd IN GLOBAL EXPORTS, BEHIND INDONESIA

EXPORTS Volume:

210 Mt

PRODUCTION (MT) 267

270

273

Value:

$26 billion

2017 -18

2018 -19

2019 -20

SUPPLY CAPACITY

QLD (64%) NSW (33%) QLD & NSW hold the largest share of Australia’s in situ black coal resources and are the largest producers

TOP 5 EXPORT MARKETS (BY EARNINGS) 45% 35% 11% Ja

n pa

5%

2%

rea iwan ndia ina I Ch S.Ko Ta

Source: Resources and Energy Quarterly, Office of the Chief Economist, Canberra, March 2020.

Supply Figure 5 - Major Australian coal deposits

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Thermal coal is used to generate around 60 per cent of Australia’s electricity, with the majority of this resource produced in Queensland and New South Wales as shown in Figure 5.


04 Economic developments in the energy resources sector

Production Australia produced 272 million tonnes of thermal coal in 2018–19, accounting for around five per cent of world thermal coal production. Production marginally increased from 267 million tonnes in 2017–18, and is forecast to grow to 288 million tonnes by 2021–22, before a marginal decrease to 286 million tonnes by 2024–25. Around three-quarters of Australia’s thermal coal output is exported.

Trade Australia is the second largest global exporter of thermal coal behind Indonesia. Australia exported 210 million tonnes of thermal coal with a real value of $26.4 billion in 2018–19; Japan (45 per cent), China (16 per cent), South Korea (15 per cent), Taiwan (12 per cent), and India (one per cent) were the largest buyers. Export volumes are forecast to grow to 225 million tonnes by 2021–22, though falling prices and weaker import demand are expected to result in decreased earnings ($18.5 billion in 2021–22).43 Persistently low spot LNG prices have encouraged some coal-to-gas switching – predominantly in Europe – which has dampened demand for thermal coal imports.

Project pipeline Australia’s production capability is expected to expand over the coming years, with several new projects on the horizon. Ten major projects were publicly announced in 2019, 36 were under feasibility assessment and one was committed (Carmichael, Queensland). Coal exploration rose by 18 per cent to $182 million in 2018–19, though expenditure remains substantially lower than its peak in 2011. The emergence of COVID-19 may affect investment in major growth projects over the next 12 months, though the full extent of impacts are not yet clear.

Global outlook

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Coal is gradually being squeezed out of the energy mix in many advanced economies as a result of environmental policies and competitive pressures from increasingly cost-competitive renewables and, in some markets, from natural gas. World exports of thermal coal plateaued in 2019, after growing by over four per cent in 2018. Lower prices are expected to drive a decline in supply from the more marginal producers in 2020 and the emergence of COVID-19 will certainly influence global markets. The COVID-19 outbreak had a modest impact on thermal coal markets in the first quarter of 2020. Restrictions on people movements in response to the virus initially affected both domestic production and demand in China. A decrease in electricity consumption in commercial and industrial operations due to COVID-19 containment measures is expected to soften worldwide coal demand. In the United States, domestic demand for thermal coal is forecast to decline in the second quarter of 2020, with much of the industrial economy shutting down in an attempt to slow the coronavirus pandemic and slower economic activity will reduce electricity demand.44 Similar trends are expected worldwide, though the fluidity of the outbreak leaves a high degree of uncertainty around the extent of impacts to the industry in the nearterm. The long-term trajectory of global coal demand varies greatly depending on the way in which global policy frameworks evolve. The IEA’s World Energy Outlook 2019 modelled long-term coal outlook based on multiple scenarios.45 The Stated Policies Scenario (which is based on existing policy frameworks and announced policy intentions) forecasts that coal demand will be essentially flat through to 2040. This is in stark contrast to the Sustainable Development Scenario (based on policies required to achieve UN Sustainable Development goals) in which coal demand falls rapidly (down 60 per cent by 2040). The diverging pathways reflect the crucial role of environmental policies in determining the future for coal.


4.5 Uranium Industry Overview

AUSTRALIA IS THE

3rd

657

EXPORTS (A$M)

PRODUCTION (TONNES)

SUPPLY CAPACITY

748

Australia holds

USA

7,618

31% of the world’s

Canada

France

Spain

Belgium

Japan

S.Korea

UK

Germany

Sweden

Finland

558

LARGEST GLOBAL PRODUCER

6,654

7,000

proven uranium reserves

80%

2017 -18

2018 -19

2019 -20

2017 -18

2018 -19

2019 -20

Around of Australia’s known resource is in South Australia

EXPORT MARKETS China

Source: Resources and Energy Quarterly, Office of the Chief Economist, Canberra, March 2020.

Australia holds

Australia holds 31 per cent of the world’s proven uranium reserves – the largest of any nation. Around 80 per cent of Australia’s known uranium resource is in South Australia, with nine per cent in the Northern Territory, seven per cent in Western Australia, four per cent in Queensland and one per cent in New South Wales.46 Three operations are currently producing uranium in Australia: Olympic Dam (copper and uranium) in South Australia, Ranger in the Northern Territory and Four Mile in South Australia.

of the world’s proven uranium reserves – the largest of any nation

The major challenges for the further development of the uranium industry are inconsistent governmental approval regimes and a lack of clarity from State and Federal Governments of their desire to see the industry developed. State-based uranium mining bans in Queensland, Victoria, New South Wales and Tasmania continue to impact uranium mining in Australia. Restrictions are also in place in Western Australia, with uranium mine development limited to four projects that have already received their primary environmental approvals.

31%

7,618 TONNES

of uranium produced in Australia in 2018–19

Production Australia produced 7,618 tonnes of uranium in 2018–19. It is the world’s third-ranking producer, behind Kazakhstan and Canada. Uranium production in Australia is expected to decline over the next two years as output winds down at the Ranger mine ahead of its scheduled closure at the start of 2021.

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Supply


04 Economic developments in the energy resources sector

Trade Australia’s uranium export earning were

$748 MILLION

in 2018–19 in real terms, up from $657 million in 2017–18

Australia’s uranium export earnings were $748 million in 2018–19 in real terms, up from $657 million in 2017–18. Export volumes are forecast to decline from 2019–20 due to an expected decrease in production. Earnings are expected to decline to $585 million in 2020–21, though forecast price growth will provide some offset to the falling production. Uranium prices are expected to slowly grow over the next two years, driven by supply cuts and slow growth in demand. Reactor constructions in Asia, the Middle East and Eastern Europe should lead to sustained but slow upward price pressure over time, with a potential for stronger growth should inventories run short before new supply comes online.

Project pipeline Low commodity prices have sharply reduced uranium exploration in Australia. Several projects are in a position to come into production if and when the uranium price increases. This includes two In-Situ Recovery (ISR) mines in South Australia – Beverley (including Beverley North) and Honeymoon – which are currently in care and maintenance. In Western Australia, four potential mines have obtained the necessary primary environmental approvals but await a further increase in the uranium price prior to progressing secondary approvals and commencing operations.­

Global outlook Nuclear power is the second-largest source of low-carbon electricity globally, with around 440 nuclear reactors in operation. Global demand and production are predicted to grow moderately over the next two years (by six per cent and four per cent respectively). Uranium production has recently been impacted by the temporary closure of a number mines due to COVID-19.

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Canadian miner Cameco announced on 23 March 2020 that the world’s largest uranium mine, Cigar Lake, would halt operations for an initial four-week period in response to COVID-19. Only days later, Namibia, a key supplier to China’s nuclear industry, ceased all mining activity to slow the spread of the virus and it is possible that similar operational pauses may occur in other countries.47 Given the highly concentrated nature of global uranium production, where just six mines produce two-thirds of the world’s uranium, disruptions in supply may send the uranium price soaring in the near-term. While global power demand has eased due to measures taken to contain the virus, demand for uranium is not expected to fall significantly, as the requirement for base load power remains.48 The long-term outlook for nuclear energy is uncertain. According to the IEA’s Nuclear Power in a Clean Energy System report,49 a doubling in the annual rate of nuclear capacity additions is needed to remain on track with the sustainability targets of their Sustainable Development Scenario (based on policies required to achieve UN Sustainable Development goals). However, IEA estimate that the nuclear fleet of advanced economies may decline by as much as two-thirds by 2040, which would lead to a major clean energy shortfall. Accelerated deployment of further wind and solar photovoltaic (PV) will most likely be required to fill the gap.50


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04 Economic developments in the energy resources sector

4.6 Renewable Energy Industry Overview RENEWABLES ACCOUNTED FOR

21%

OF AUSTRALIA’S ELECTRICITY GENERATION IN 2018

EMPLOYMENT More than

20,000

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people employed across the renewable energy sector

Renewable generation grew to

21% OF TOTAL ELECTRICITY GENERATION

in the 2018 calendar year, with hydro, wind and solar contributing the most energy51

SOURCES 1

Hydro

2

Wind

3

Small-scale solar

CONSUMPTION Renewables account for

6%

OF TOTAL DOMESTIC ENERGY CONSUMPTION

INVESTMENT IN 2018

LARGE-SCALE SOLAR

Value:

Fastest growing source of generation

A$24.5m 13,000 14.8GW

Jobs:

Output: of projects committed or under construction

28

projects completed in 2018, with 59 projects committed or under construction

State of renewables in Australia Australia’s energy sector is undergoing a profound and complex transformation as the shift to renewable energy gathers momentum. Renewable generation grew to 21 per cent of total electricity generation in the 2018 calendar year, with hydro, wind and solar contributing the most energy.51 Solar generation was primarily through small-scale PV, though large-scale solar was the fastest growing source of generation in 2018. Tasmania has considerable hydro resources and leads the renewable energy charge in Australia, while South Australia is an emerging renewable energy powerhouse, sourcing more than 50 per cent of its electricity from renewables in 2018. Transport, heavy industry and the built environment are also crucial in the pursuit of lower emissions and in ensuring Australia meets its international commitments under the Paris Agreement. Australia maintains a heavy reliance on oil, coal and gas across sectors, with renewable energy accounting for only six per cent of Australia’s energy consumption in 2018. Considerable investment is currently being directed towards renewable energy solutions in Australia. Thirty-eight renewable energy projects were completed in 2018, totalling 2,333-megawatt capacity.52 This included 28 large-scale solar projects. At the end of 2018, 14.8 GW of new generation was under construction or financially committed, representing $24.5 billion in investment and more than 13,000 jobs.


Figure 6 - Renewable generation in Australia by technology type (%)

33% WIND

35% HYRDO

20% 5% MEDIUM/LARGESCALE SOLAR

SMALL-SCALE SOLAR

7% BIOENERGY

Source: Clean Energy Council, Clean Energy Australia Report 2019.

State

n/a 10% 16% 53% 15%

Tasmania

96%

South Australia

53%

Victoria

21%

Western Australia

16%

New South Wales

15%

Queensland

10%

Northern Territory

21% 96%

Generation of renewables

n/a

Source: Clean Energy Council, Clean Energy Australia Report 2019.

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Figure 7 - Generation of renewables by state


04 Economic developments in the energy resources sector

Trade

15,000 HECTARE

solar array is to be constructed along with battery storage, to ensure the continuous supply of power

Australia has enormous capacity to generate wind, solar, wave and tidal power and the potential to become one of the world’s largest generators and exporters of renewable energy. According to think tank Beyond Zero Emissions, Australia’s economically demonstrated solar and wind energy resources are estimated to be 75 per cent greater than Australia’s coal, gas, oil and uranium resources combined. Japan and South Korea are already showing great interest in imported renewable power – these nations have high energy use, high population density, low potential for generation, and a robust energy trade track record with Australia. Hydrogen could play a major role as a clean fuel of the future and a viable solution to decarbonise electricity generation, transport and heat. With large potential for renewable energy, large fossil fuel resources and good potential CO2 storage sites, Australia is well placed to become a major producer of hydrogen for domestic use and as an export industry. Large-scale hydrogen production is not yet available in Australia, though several pilot, demonstration and small-scale projects are in operation as the nation looks to scale-up production capacity in the coming years.

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There is also the potential for high voltage sub-marine cables to disrupt the hydrogen opportunity. The export of solar energy via these submarine cables may become a reality in the nearer term. Plans are underway for a project in the Northern Territory that will produce approximately 20 per cent of Singapore’s electricity through solar power.53 This energy will be sourced from the Australian desert near Tennant Creek and transmitted via a high-voltage direct-current submarine cable snaking through the Indonesian archipelago to Singapore. A 15,000-hectare solar array is to be constructed along with battery storage, to ensure the continuous supply of power.


Global outlook The past decade has seen strong growth in the deployment of renewable energy technologies. The power sector has led the way thanks to sharp cost reductions for solar PV and wind power, though the uptake of renewables has been slower in end-use sectors such as industry and buildings, with continued global reliance on non-renewable energy. Renewable power consumption grew by 14 per cent in 2018, providing nine per cent of the world’s electricity.54 Germany, Spain, United Kingdom, Italy, Portugal, Denmark, Finland, Ireland and New Zealand are currently leading the way, with renewables contributing more than 20 per cent of total power generated. Containment measures taken to slow the spread of COVID-19 are leading to reduced power demands worldwide and are in turn affecting clean energy transitions. Forecasts indicate that projected growth in newly commissioned solar and wind projects will be cancelled out for 2020 and reduced by a further ten per cent in 2021 due to coronavirus and contraction of currencies across the globe.55 The IEA predicts that falling oil and gas prices will place downward pressure on the economics of renewable sources in the short-term, and without policy support, some renewables that have seen rapid deployment may be displaced to cheap hydrocarbons and fossil fuels.56 Renewable electricity generation is expected to climb sharply over the next 20 years. According to the IEA’s World Energy Outlook 2019, renewable electricity generation may increase by 166 to 285 per cent by 2040.57 The level of predicted growth may vary considerably depending on the selection of global environmental policy frameworks that are implemented in the future, though the continued uptake of renewable energy plays a central role in all scenarios.

Figure 8 - Installed power generation capacity by source in the IEA’s Stated Policies Scenario, 2000-2040 GAS

OIL

NUCLEAR

OTHER RENEWABLES

HYDRO

SOLAR PV

BATTERY STORAGE

Projections

3500 3000 2500 2000 1500 1000 500

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

0 2000

GW

WIND

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COAL


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Key challenges and opportunities

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05


05 Key challenges and opportunities 5.1 Innovation and Global Competitiveness Australia has developed one of the strongest energy resources sectors in the world, which serves as a principal source of revenue for the nation. To maintain our leadership position in highly competitive and evolving global energy markets, the sector must continue to secure investment for innovation in advancing digital and low-emissions technologies. Innovative economies have been shown to be more productive, resilient, adaptable to change and better able to support higher living standards.58 According to Innovation and Science Australia (ISA), however, Australia’s business sector appears to be falling behind in the global innovation race – a major concern for business leaders and policy makers alike.59 The ISA’s 2020 report Stimulating business investment in innovation engaged with over 180 firms to better understand the current levels of business innovation investment in Australia as well as identify the primary drivers and barriers to investment. Their analysis identified the following trends: • Business expenditure on research and development (R&D) is not a strong predictor of innovation investment. Sectors where many firms are actively innovating are more likely to have greater productivity, irrespective of whether they undertake R&D. • On average, large and small firms that invested in innovation outperformed those that did not. • Small and medium enterprises (SMEs) that accelerated investment in technology and utilisation of information technology had higher revenue and employment growth than firms that did not undertake those activities.

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• Australian firms that invested in innovation (of any type) had higher revenue and job growth than those that did not. Based on the outcomes of their study, ISA made four strategic recommendations to stimulate business innovation investment in Australia: 1. Government should rebalance its policy mix to support business investment in both non-R&D Government rebalance its policy additional mix to support business investment in bothover a innovation and R&D, should specifically with significant support for non-R&D innovation 1 defined non-R&D innovation and R&D, specifically with significant additional support for non-R&D period (such as five to 10 years). innovation over a defined period (such as five to ten years). 2. Government and businesses should prioritise the key growth sectors. 3. Government and businesses should develop and encourage a ‘growth through innovation’ mindset and the business processes required to implement this mindset among shareholders, directors and 2 managers. Government and businesses should prioritise the key growth sectors. 4. Government should facilitate access to, and attraction of, innovation skills and capabilities.

3

Government and businesses should develop and encourage a ‘growth through innovation’ mindset and the business processes required to implement this mindset among shareholders, directors and managers

4

Government should facilitate access to, and attraction of, innovation skills and capabilities.


5.2 Australia’s Energy Shift

33 GIGATONNES (GT)

in 2019 following two years of consecutive growth

There is no more contentious global issue than climate change and how to navigate the energy transition whilst balancing complex economic and social justice challenges. Australia faces a unique set of challenges to deliver a clean, affordable and reliable energy future that supports a growing, globally competitive economy and delivers jobs for all Australians. With broad acceptance by expert scientists and society that the climate has and will continue to change, there is the urgent need to focus on what Australia can do to address climate change and lower emissions whilst also ensuring we secure access to the affordable, reliable and clean energy that is fundamental to every part of the Australian economy. Global greenhouse gas emissions plateaued at around 33 gigatonnes (Gt) in 2019 following two years of consecutive growth, though remain at historic highs. This stabilisation was primarily due to a sharp decline in CO2 emissions from the power sector in advanced economies, thanks to growing renewable generation (mainly wind and solar PV), fuel switching from coal to natural gas, and increased nuclear power output.60 Cost reductions in renewables and advances in digital technologies are opening huge opportunities for energy transitions. Scenarios for global and local energy demand and supply trends vary widely depending on policy framework assumptions. However, some broad trends and challenges are identified in the IEA’s World Energy Outlook 201961, including: • Global greenhouse gas emissions data shows that energy-related emissions hit another historic high in 2018. • Almost one billion people around the world do not yet have access to electricity. • Cost reductions in renewables and advances in digital technologies are enabling the energy transition and the growth in electricity use, whilst also adding challenges to traditional energy systems that need to be addressed. • The faltering momentum behind global energy efficiency improvements is cause for deep concern. It comes against a backdrop of rising needs for heating, cooling, lighting, mobility and other energy services. • There is a three-way race underway among coal, natural gas and renewables to provide power and heat to Asia’s fast-growing economies. But in all scenarios the role of gas continues to grow out to 2040. Demand for natural gas has spurred a worldwide wave of investment in new LNG supply and natural gas pipeline connections. • Large-scale deployment of carbon capture utilisation and storage (CCUS) will be vital to reduce the world’s emissions and to secure the future of Australia’s existing energy and other industries. Existing power plants, factories, cargo ships and other capital-intensive infrastructure will also need to address emissions reduction.

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Global greenhouse gas emissions plateaued at around


05

Key challenges and opportunities

Australia must support investment in the vital energy resources needed to power the economy. Australia must also support, accelerate and invest in advanced technologies and low-emissions technologies that are required to address climate change and assist the nation to meet its carbon emissions reduction targets. Cost reductions in renewables and advances in digital technologies are opening huge opportunities for energy transitions. Many of the solutions to the network challenges Australia faces could be addressed through alternative fuel sources, energy storage technologies, critical energy minerals and off grid energy management systems utilising increasingly smart technologies. In 2019, CSIRO released a landmark report for Australia ‘Australian National Outlook 2019 – Securing our nation’s future prosperity’.62 The report identified two contrasting scenarios for the nation by 2060: 1) Slow Decline and 2) Outlook Vision. In Slow Decline, Australia fails to adequately address major global and domestic challenges, resulting in declining economic, social and environmental outcomes. In the Outlook Vision, Australia takes decisive, planned and collaborative action and a long-term view, securing a far more positive future for all Australians and positioning the country successfully in a globally competitive market and energy economy that is affordable, reliable and has low emissions. The report highlights the large difference between these two scenarios, sets out the greatest challenges we face and makes a compelling and urgent call to every university, every area of government and across Australian industry to collaborate to address these challenges and unlock a better future for everyone. Solving these challenges through innovative science and technology has never been more important. The report also identifies the need for a key ‘energy shift’ that will manage Australia’s transition to a reliable, affordable, low-emissions energy economy that builds on Australia’s existing sources of comparative advantage: Manage the transition to renewable sources of electricity, which will be driven by declining technology costs for generation, storage and grid support.

Improve energy productivity using available technologies to reduce household and industrial energy use.

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Develop new low-emissions energy exports, such as hydrogen and high-voltage direct current power. To help solve the challenges identified in the report, CSIRO are developing Missions. The Missions will be major scientific and collaborative research programs aimed at making significant breakthroughs and accelerating the pace and scale at which Australia can solve each challenge and unlock the Outlook Vision. One Mission will address Australia’s hydrogen opportunity, as described in the Hydrogen section of this report.


5.3 Role of Gas Australia’s gas industry, domestically and through exports of LNG, contributes substantially to the economic development of the nation and, as a cleaner alternative to other fossil fuels, it plays a key role in reducing global greenhouse gas emissions, particularly for our Asian trading partners across the AsiaPacific.63 However, this needs to go hand in hand with solutions to reduce local emissions at point of production. With carbon emissions occurring at many points in the gas value chain there exist many opportunities to improve its emissions profile. Such opportunities include: • Deployment of renewables technologies such as large scale solar and battery storage to reduce the consumption of gas as to produce the energy required for its processing and conversion into LNG. • Implementation of carbon capture and geosequestration techniques such as those used at Chevron’s Gorgon facility to remove the entrained CO2 from the production gas and store it in naturally occurring geologic formations. • Improving plant energy efficiencies through research into new processing techniques and the increasing deployment of artificial intelligence and machine learning.

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• The use of methanation and reformation technologies to combine produced and recovered CO2 with hydrogen to generate synthetic gas and other products.


05

Key challenges and opportunities

5.4 Hydrogen Hydrogen is already used as an industrial feedstock in many industries globally, most commonly in petroleum refining and fertiliser production; however, clean hydrogen has the potential to support Australia’s and the world’s clean energy transitions. Demand for hydrogen, which has grown more than threefold since 1975,64 continues to rise but virtually all hydrogen is currently supplied using fossil fuels without CCUS, meaning there is significant potential for emissions reductions from producing clean hydrogen to meet current demands. However, a more significant opportunity exists for clean hydrogen to play a major role in decarbonising both the energy and industrial sectors. There are, however, some significant uncertainties, challenges and potential disruptions and therefore realising this potential will require international co operation to accelerate the growth of versatile, clean hydrogen around the world. As the IEA states in a June 2019 Report on The Future of Hydrogen:

...if governments work to scale up hydrogen in a co ordinated way, it can help to spur investments in factories and infrastructure that will bring down costs and enable the sharing of knowledge and best 65 practices...

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The hydrogen of today is almost entirely supplied from natural gas (and to a lesser extent coal) through steam reforming, which is the cheapest method of production currently available. The downside to this process is that biproducts include carbon monoxide, carbon dioxide and other greenhouse gases. Fuel costs account for the largest expense component in the production of hydrogen, and, while hydrogen may also be extracted from electrolysis of water and biomass gasification, these processes have historically been cost prohibitive. With declining costs for solar PV and wind generation, building hydrogen production electrolysers at locations with excellent renewable resource conditions could become a low-cost supply option for clean hydrogen, even after taking into account the transmission and distribution costs of transporting hydrogen from (often remote) renewables locations to the end-users. Hydrogen is gathering significant momentum globally, with several countries and sub-national governments announcing new hydrogenfocused strategies and policies since 2018. These include Japan, France, Australia, Korea, and the state of California. Around 50 targets, mandates and policy incentives are in place today that directly support hydrogen, with the majority focused on transport. In their report the IEA identifies: • In transport, the competitiveness of hydrogen fuel cell cars depends on fuel cell costs and refuelling stations while for trucks the priority is to reduce the delivered price of hydrogen. Shipping and aviation have limited low-carbon fuel options available and represent an opportunity for hydrogenbased fuels. • In buildings, hydrogen could be blended into existing natural gas networks, with the highest potential in multi-family and commercial buildings, particularly in dense cities while longer-term prospects could include the direct use of hydrogen in hydrogen boilers or fuel cells. • In power generation, hydrogen is one of the leading options for storing renewable energy, and hydrogen and ammonia can be used in gas turbines to increase power system flexibility. Ammonia could also be used in coal-fired power plants to reduce emission


7,600 JOBS

and add about

$11 billion a year in additional gross domestic product (GDP) by 2050

CSIRO has identified five similar active hydrogen industry opportunities: integration into gas networks, transport systems, electricity systems, exports and industrial processes. Clean hydrogen presents an opportunity for Australia to take the lead in the emerging global market for low-and zero-emissions energy. In December 2019, the Council of Australian Governments (COAG) Energy Council launched a National Hydrogen Strategy to:

Build a clean, innovative and competitive hydrogen industry

Position Australia’s hydrogen industry as a major global player by 2030.

Coordinate the approach to projects that support hydrogen industry development.

The National Hydrogen Strategy66 forecasts a cautiously optimistic scenario that could see an Australian hydrogen industry generate about 7,600 jobs and add about $11 billion a year in additional gross domestic product (GDP) by 2050. Whilst the global hydrogen economy is still embryonic and will need a decade or more to develop and mature, action is required now to ensure Australia captures the significant opportunity to help shape the production and use of hydrogen and becomes a leading source of hydrogen knowledge and solutions. Such action must address the whole hydrogen value chain from production, storage, and transport to the applications/utilisation. CSIRO is consulting widely across Australia to develop a Hydrogen Mission to help address the big challenges identified in its landmark 2019 report.67 The Mission will aim to bring together industry, government and other research organisations to fast-track emerging hydrogen technologies. The overall focus will be on enabling Australia’s domestic and export hydrogen industries. Importantly, solving the challenges identified can have a multiplier effect that boosts demand for hydrogen – particularly in large scale industrial settings – and encourages further hydrogen supply cost reductions through improvements in efficiency and economies of scale. To stimulate domestic and international collaboration, CSIRO had also developed an interactive Technology Marketplace for industry, government and other research institutions to understand technology benefits, current state, R&D priorities and active Australian institutions.

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The National Hydrogen Strategy66 forecasts a cautiously optimistic scenario that could see an Australian hydrogen industry generate about


05

Key challenges and opportunities

5.5 Carbon Capture, Utilisation and Storage (CCUS) Approximately

70

MEGA TONNES (MT)

of global hydrogen is produced per annum

More than

98% OF GLOBAL HYDROGEN

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is produced from the steam reforming of methane or gasification of coal

Global hydrogen production is around 70 mega tonnes (mt) per annum. The majority (more than 98 per cent) is produced from the steam reforming of methane or gasification of coal, though this process also generates around 830 mt of CO2 emissions globally per year.68 In the short term, hydrogen can be made from these steam reformers of methane, in well-established industrial processes, and this can also act as an early entry point for low-cost CO2 transport and storage. Carbon Capture and Storage (CCUS) and its supporting technologies will therefore need to be an integral component of Australia’s approach to its hydrogen economy if the nation is to both activate the technology market and meet its emissions targets. Historically, developed industrial economies have over-focussed on the application of CCUS to electricity generation from coal with some attention to gas. This has pitched the final product of decarbonised electricity (from coal) into a market where subsidised renewable generation can produce electricity at prices comparable to or cheaper than conventional high carbon power. CCUS then fails commercially. The true value of CCUS is its ability to be applied across the entire economy. The IEA expects that CCUS will account for seven per cent of the cumulative emissions reductions needed globally by 2040.69 CCUS is already available at commercial scale (one million tonnes per annum) internationally, this is not yet the case in Australia. However, some world leading pilot projects have commenced: • The Hydrogen Energy Supply Chain (HESC) is a world-first pilot project to safely and efficiently produce and transport clean hydrogen from Victoria’s Latrobe Valley to Japan. The project could potentially bring billions of dollars of international investment to Victoria and Australia, create a significant number of jobs across pilot and commercial phase construction and operations and position Australia as a global leader in the supply of clean hydrogen energy. The HESC project will create a sustainable solution for the use of Australian coal deposits that does not contribute to carbon emissions, by coupling the project with CCUS and considering carbon offsets to mitigate the CO2 produced by gasification and gas refining processes. • The CarbonNet Project (CarbonNet) is investigating the potential for establishing a commercial-scale CCUS network. The network is seeking to bring together multiple CO2 capture projects in Victoria’s Latrobe Valley, transporting CO2 via a shared pipeline and injecting it into deep underground, offshore storage sites in Bass Strait. The Gippsland region is widely recognised as a world-class location offering significant potential for CCUS. The offshore Gippsland Basin has been found to have the highest technical ranking of 25 major basins across Australia and the largest storage potential of any east coast basin.70 The use of captured CO2 to sustain the pressure in oil and gas fields is also a growing opportunity, with extracted entrained CO2 being used to enhance the production of oil from ageing fields, such an approach is being explored by Santos.71 However, a number of barriers exist to fully leveraging the opportunities presented by Carbon Capture and Storage (CCS) and CCUS; these include identifying and testing potential storage reservoirs in Australia’s geological formations, CCS and CCUS technologies and solutions reaching commercial parity or better when compared to current processes, and identifying and developing products and markets for the outputs of CCUS value chains. The energy resources sector is also developing projects globally to utilise CO2 into Enhanced Oil Recovery (EOR).


5.6 Accelerating Digital and Advanced Technologies Australia has developed one of the strongest energy resource sectors in the world, built on world-leading innovation and creating and sustaining over 94,800 direct jobs.72 Ten times the number of direct jobs are created in the rest of the economy as a result of investment in Australia’s oil and gas industry.73 This highlights not only the industry’s long investment in innovation and technology and the high value created, but also, critically, the future opportunity from developing and deploying digital and advanced technologies here in Australia and the threat from a decline in further investment in the sector and in creating advanced technologies. While Australia earned a substantial $50 billion from exports of LNG in 2018–19, the energy resources sector is facing increasing global competition and structural changes to the global energy market. Taking one example, there has been a rapid expansion in global LNG supply capacity over the last few years, and the Chief Economist’s Office expect that to continue in 2020 although at a slower pace.74 Qatar and the United States are likely to surpass Australia’s LNG exports by the late 2020s. Australia also remains a relatively high-cost producer. To address this challenge, Australia must support the acceleration and deployment of digital and advanced technologies across the energy resources sector. In addition, support for and investment in low emissions and digitally based technologies will help the nation achieve a low-carbon, reliable and affordable energy future for all Australians. The energy resources sector itself is working individually and collaboratively (through, for example, a range of projects and strategic initiatives with NERA75, supply chains, governments and other key industry stakeholders such as universities and CSIRO) to manage cost structures, improve efficiency and deploy advanced technologies to increase value.

For Australia’s oil and gas industry specifically, digital automation technologies could add $8 billion in value in 2030, boosting its GVA by 30 per cent. Automation technologies in oil and gas could generate an additional $1 billion of value in the domestic supply chain, add a further $1 billion in the wider economy, and create 5,000 net jobs across the economy. Industry experts estimate that advances in technology could lower construction costs of a future LNG plant by around five to ten per cent, and plants of the future could be around 30 per cent more productive than an equivalent plant today.77 The opportunities for Australia are real; however, the benefits will not come by themselves. If Australian technology suppliers are unable to support the miners and operators in their drive to automate their operations, these producers will be forced to import advanced equipment and services, seriously shrinking the economic opportunity for Australia. In this scenario, Australia would become a passive recipient of technologies produced elsewhere instead of spearheading the technological progress itself. Strong supplier involvement during automation could see the oil and gas industry generate up to $60 billion of value in the Australian economy in 2030, though failure to adapt to the industry’s needs could reduce this figure by $5 billion.78

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The increasing proliferation of digital and advanced technologies is a global phenomenon and represents a tremendous opportunity for Australia. NERA and METS Ignited commissioned AlphaBeta to conduct an economic analysis of the potential opportunities and impact of technologies such as data analytics, automation and robotics on Australia’s mining and oil and gas industries within the next decade. The 2019 report, Staying ahead of the game, showed that embracing the use of automation technologies in Australia’s resources industries could, if coordinated and well managed, add $74 billion in value to the Australian economy and create over 80,000 new jobs by 2030.76 To realise these benefits, Australia’s technology sector must act now, and through collaboration continue to drive a globally competitive supply chain.


05

Key challenges and opportunities

Staying ahead of the game recommends four areas of focus to accelerate the adoption of digital automation and that are informing NERA’s Strategic Priorities:

1

Strengthen collaboration Industry, government, education providers and researchers need to join forces and commit to developing technology together.

2

Create clusters Australia urgently needs to establish true cross-industry automation and robotics technology clusters, hubs of interconnected businesses, suppliers, and associated institutions. Best practice suggests that Australia should consider establishing a technology council – a membership-based platform to help technology suppliers to network, collaborate, find talent and explore new business opportunities.

3

Create an entrepreneurial ecosystem Australia needs to become a thriving entrepreneurial marketplace for commercialising ideas. Universities have a role to play in supporting an entrepreneurial ecosystem, with research focus not only on the technology needs and challenges, but also delivering commercial outcomes that will continue to sustain and support the sector.

4

Boost skills R&D

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Industry, education providers and governments need to intensify efforts to build a pipeline of talent to meet the rising demand for skills and innovation, including transitioning today’s workforce into the workforce of the future.

5.7 Remote Operations Whilst Australia’s geography, combined with our population size and distribution, is often cited as a big challenge – adding to costs, making it difficult to get market scale and requiring people to access and work in often remote and harsh environments – this challenge has also created an opportunity. Australia’s energy and mineral resources sectors are leading the world in working effectively and safely in remote regions and using technology to support those operations. These remote operations are set to be transformed by the ongoing development and adoption of robotics, automation and artificial intelligence technologies. Further, these technologies and their applications are critical requirements in any future near space and other space exploration initiatives. Australia is seeking to advance on existing capabilities and strengths through partnering space technology and services with other industries; for example, the Federal Government is supporting investment in space data analysis facilities that can support analysis of satellite data for areas such as mining, agriculture, emergency services and maritime surveillance, and will build capability in data analysis for space missions. Leveraging this position of global leadership is a key opportunity for Australian industry. The global market for this knowledge will either be filled by Australian industry exporting its skills and technology or by market participants elsewhere developing competing skill sets, once again risking leaving Australia being an early adopter but eventual consumer of others’ knowledge.


5.8 Future Work Skills The rapid global development of digital technologies and what is often called Industry 4.0 or the Fourth Industrial Revolution is set to reshape Australia’s energy resources sector and will require new organisational and team structures, skills and capabilities. In general, humans are slow to change and adopt new technology. The hype around the impact of digital technologies – technology the destroyer versus technology the saviour – is making many people concerned and even fearful about the impact on their jobs. This may mean people in organisations act as blockers of innovation, which can be compounded by traditional organisational structures. With the move to integrated and automated operations, organisations will require more agile and multidisciplinary teams and support strong team (often virtual) communication and collaboration skills. As an industry we need to look beyond the development of technology for its own sake and keep people at the centre of the process. We must engage with existing personnel to ensure new technologies are suitable and that they can be integrated. New workforce entrants, as well as existing personnel need to be given the skills to adapt and work in the ever-changing technological environment.

Emerging innovations in automation are specifically related to the way that enabled and integrated digital technologies, including sensors, combined with ever more powerful data analytics tools, are providing industry with greater insights and improving asset utilisation and productivity. Future energy resource operations will increasingly move towards industrial and then ultimately enterprise level interoperability, with full enterprise level integration of systems and data and optimised performance. Digital twins will be critical as will common data language standards. This open ecosystem will in turn support innovators and technology providers to enter what has been a relatively closed, vertically integrated and global supply chain. These new providers are already in and will continue to provide a key role in developing the emerging skills they need to design, build, operate and maintain their technologies and will be critical partners for the vocational and educational sector as university engineering departments and industry end users of their technologies. With much of the new automation and robotics technology being deployed across multiple sectors including resources, agriculture, health and defence, and into remote and regional Australia, ensuring suitably skilled personnel are available in these locations to service and maintain them is critical. The cross-industry use of similar technologies provides a critical mass that could sustain regional skills pools, but these personnel will require local access to training on an as needed basis, skills that can be provided through appropriately directed and supported vocational education and training facilities. Addressing this ongoing skills gap is essential for Australian industry to stay ahead and for the Australian workforce to remain competitive. The future energy resources workforce must be fluent in multiple emerging fields such as the ability to contextualise and interpret increasing volumes of data, either as the collector and enabler of data collection, its analysis or its use. They will need to understand how to establish and maintain, in an increasingly technological environment, appropriate levels of network and cyber security to ensure safe and reliable operations of their networks. They will need to become comfortable working alongside autonomous and semi-autonomous robotic devices used for inspection and data collection purposes, and these future workers will frequently need to be able to work at distance from both their colleagues and the plant they are responsible for.

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To support the Staying ahead of the game report on automation, NERA commissioned a further AlphaBeta report Preparing Australia’s future oil and gas workforce, which outlines the future skill requirements and workforce challenges expected to be faced by the oil and gas sector in 2030 through the uptake of automation and technologies. The report is positioned to support industry, policy makers and training providers map and plan for workforce transition and future workforce skills for automation and digitalisation, whilst recognising the uncertainty of potential future scenarios and the need for adaptability. Doing so can add $74 billion to the economy by 2030 and create over 82,000 jobs. To realise this, however, it is critical that Australia works to upskill current and future workers to adapt to this change.79


05

Key challenges and opportunities

5.9 Emerging Global Business Model Australia’s energy resources sector operates in the competitive global commodity market. The following factors are influencing the emerging global business model for the energy resources sector: • Maximising efficiency through adoption of advanced technology and collaboration to find new value across the value chain. • More variegated and competitive markets. • Automation and digital technology driving integrated operations (ability for communication of data between each technology component to drive full optimisation of operations). • Changing technology and product mix to address low carbon and energy transition. • Standardisation to reduce costly bespoke engineering standards that hinder global trade, and new automation and data standards that enable new technology suppliers and greater innovation. • External innovation partnerships with technology/service providers from outside traditional energy resources supply chain, e.g. advanced visualisation technologies, robotics, sensors. • Vertical mergers of specialised supply chain companies.

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• Performance based contracts that extend beyond the sales point to payments based on ongoing value created by the technology and provision of services to operate/maintain it. This requires a far earlier, deeper, ongoing partnership between the miners/operators and their supply chain Oil Field Service Companies (OFSs) and Original Equipment Manufacturers (OEMs).


5.10 Offshore Engineering and Infrastructure

$30 BILLION

in potential liability associated with decommissioning of oil and gas infrastructure

3,500 KILOMETRES OF PIPELINE

35

PLATFORMS IN COMMONWEALTH WATERS

Energy transition Australia has an estimated $30 billion in potential liability associated with decommissioning of oil and gas infrastructure, including more than 3,500 kilometres of pipeline and 35 platforms in Commonwealth waters. Re-purposing these assets could potentially play a significant role in Australia’s energy transition, through supporting carbon capture and storage, hydrogen and renewable energy production. Re-purposing involves augmenting assets that have reached the end of their commercial life for alternate uses. Re-purposing is yet to be proven in the Australian oil and gas sector and research is needed to understand the feasibility and scope for application to Australian infrastructure. However, the approach was recently explored in a report from the UK Oil and Gas Authority80 investigating energy integration. The report found that multiple offshore integration concepts are technically feasible and would be viable options for helping to lower the oil and gas industry’s carbon footprint and decarbonising the economy: • Carbon Capture and Storage – The approach has been piloted offshore and provides significant storage and decarbonisation potential and opportunity for oil and gas synergies. • Hydrogen – Feasible production avenues through both ‘blue’ hydrogen (produced by natural gas reforming) and ‘green’ hydrogen (electrolysis produced by renewables) routes, enabling decarbonisation of power, heat and transport. The offshore energy sector offers significant production, storage and transport potential. • Offshore energy hubs can help scaling up net-zero energy solutions by allowing hydrogen to be generated offshore using windfarms and stored in reservoirs to be transported to shore using oil and gas infrastructure. Other potential re-use options include augmenting platforms for wind or solar generation or conversion of rigs into artificial biotic reefs under a ‘rigs-to-reefs’ model. The latter approach has already been deployed in the United States, Brunei and Malaysia.

Decommissioning Decommissioning refers to the legal obligation for companies to remove or dispose of oil and gas assets at the end of their productive life, in a way that meets the health and safety requirements of the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA), the offshore regulator. If closing down/decommissioning expenditure exceeds assessable royalty receipts, the excess gives rise to a refundable credit at 40 cents in the dollar of the excess. Similar refunds exist for the oil and gas industry in the United Kingdom and this has catalysed substantial government efforts to drive efficiency and reduce taxpayer liabilities for decommissioning. The current target is cost reductions of 35 per cent, with 17 per cent reductions achieved over the past two years. NERA is pursuing a program of work to reduce decommissioning costs, including through operator collaboration, efficiency and technology improvement. Technology is estimated to account for 50 per cent of potential cost reductions that can be achieved for decommissioning. Driven by Australia’s leadership in oil and gas production for more than 40 years, the Australian service sector has developed world class expertise capabilities which directly translate to decommissioning activities. Many of these companies are already globally connected and have a presence in international markets. The Asia Pacific region is expected to require $100 billion of decommissioning work, including 55,000 kilometres of pipeline, 35,000 wells and 2,600 platforms. NERA is working with Austrade and the service sector to understand and facilitate further opportunities for growth of Australian SMEs, including particularly in South East Asia. For example, in 2019, NERA facilitated two roundtables to connect Australian suppliers with opportunities in Malaysia.

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Australia has an estimated


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NERA’s strategic priorities

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06


06 NERA’s strategic priorities NERA is the national Industry Growth Centre for Australia’s energy resource industries. We are one of six Industry Growth Centres set up by the Australian Government to drive long-term economic growth and jobs through the discovery, commercialisation, transfer and deployment of advanced technologies across sectors of competitive or strategic advantage to the nation. The Industry Growth Centres are match funded by the Australian Government and industry stakeholders, with additional funding provided by some state governments. The six Industry Growth Centres are: • Advanced Manufacturing Growth Centre (AMGC) • Australian Cyber Security Growth Network (AustCyber) • Food Innovation Australia Limited (FIAL) • Mining Equipment, Technology and Services (METS Ignited) • MedTech and Pharma Growth Centre (MTPConnect) • National Energy Resources Australia (NERA). The six Industry Growth Centres, alongside the Defence Capability Network, the recently established Australian Space Agency and other emerging collaborative initiatives such as AROSE and the Data61supported national Robotics Hub, are collectively building up technology innovation systems and provide a vital cross-industry network of domain expertise and knowledge, demand-driven technological innovation and research, and a growing network of Export Hubs. NERA operates as an independent and trusted source of information and insight into the energy resources sector’s challenges and opportunities, and a national focal point for connection to the technology solutions that will ensure Australia maximises its huge energy advantage. NERA’s strategic vision is:

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Australia as a global energy powerhouse, a sought-after destination for investments and the leading source of knowledge and solutions. NERA’s project fund of

$15.6 million x2.5 multiplier is creating a

NERA works with

+175

for the energy resources sector through a combined investment with industry.

PROJECT PARTNERS

from industry operators, supply chains, SMEs and innovators, research organisations and governments

NERA’s strategic roadmap aims to unlock

$10 billion of new value for the benefit of all Australians


Knowledge Priorities Eight Knowledge Priorities provide guidance on where the energy resources sector needs to focus to improve its competitiveness in the global landscape. NERA developed these Knowledge Priorities in consultation with energy resources sector participants in 2017 and they were refined in NERA’s 2018 SCP. They continue to be relevant through 2019 and 2020. 1

Enhance skills and business capabilities to support automisation and digitisation

2

Build talent and enable effective collaboration and innovation

3

Pursue a sustainable and low carbon energy future

4

Understand and unlock Australia’s resources base

5

Develop new market and business models

6

Commercialise technology and research

7

Enhance efficiency in operations and maintenance

8

Optimise the regulatory framework

Since our inception in 2016, NERA has worked to maximise the value to the Australian economy by supporting the energy resources sector to be globally competitive, sustainable, innovative and diverse. With over 175 project partners from industry operators, supply chains, SMEs and innovators, research organisations and governments, NERA’s project fund of $15.6 million is creating a x2.5 multiplier for the energy resources sector through a combined investment with industry.

1

Discover digital and technology solutions to industry’s challenges through collaborative industry-led programs designed to commercialise and apply R&D and innovation

2

Drive collaboration across industry sectors e.g. for remote operations, across the mining, oil and gas, space and agriculture sectors

3

Support technology led solutions in hybrid, hydrogen, carbon capture and storage and carbon utilisation to decarbonise the economy and ensure access to affordable and reliable energy for all Australians

4

Accelerate supply chain development and SME growth

5

Develop business capability and capacity and support industry clusters and export hubs

6

Support independent science, data, R&D and innovation to improve industry’s environmental, safety and social performance

7

Establish Australia as a global leader in life extension, repurposing and decommissioning of energy resources infrastructure

In partnership with industry, researchers, innovators and governments, NERA has set a yen-year strategic roadmap to achieve the cultural change required to boost productivity and growth across Australia’s energy resources industries, focussed on overcoming barriers to innovation in digital, automation and clean technologies. NERA’s strategic roadmap aims to help deliver transformational change and sector-wide impact to unlock +$10 billion of new value for the benefit of all Australians. NERA is implementing seven key strategies to support the achievement of our vision through increasing and enhancing: • Collaboration, innovation and commercialisation. • Market access for high value, export-focussed businesses (including SMEs) and new international opportunities. • Management and workforce skills to support collaboration, innovation and digital technologies. • Regulatory reform.

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NERA Strategies


06 NERA’s strategic priorities

6.1 Discover digital and technology solutions to industry’s challenges through collaborative industry-led programs designed to commercialise and apply R&D and innovation Over the last five years, Australia’s energy resources sector has faced some major challenges, including lower commodity prices, structural changes in global markets, growing competition, local cost pressures and market scale issues unique to our geography and population and the energy transition with renewables now highly cost competitive. To address these challenges and maintain our global leadership position in energy resources, the industry is increasingly looking to accelerate and invest in advanced technologies such as AI, automation and robotics. The energy resources sector, along with the rest of the nation and the world, is at a digital crossroads: a critical time when leadership, innovation, collaboration and action are needed to enable Australia and our sector to ride the wave, maximise the opportunities for businesses and create the jobs of tomorrow across Australia. NERA is playing a key role in creating the collaboration and innovation connections essential to ensure Australia successfully navigates this digital transformation. Intelligent use of data, an ability to move rapidly given the pace of change and founding of new partnerships and trust are the keys to success in this environment. Many of NERA’s projects have a digital focus including the following examples.

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NERA is supporting the University of Western Australia’s (UWA) Industry 4.0 ERDi Testlab – one of six Testlabs at six universities across the nation with funding from the Australian Government to support digital education and SME growth. An Industry 4.0 aligned, open standards based, digital interoperability landscape will have a significant impact on the energy resources sector in terms of both bottom-line benefits and enabling more rapid technology adoption/rate of change. This directly affects technology SMEs, as they will be able to integrate their specific solutions into operations ‘out of the box’. Removing this barrier will significantly improve start-ups’ and SMEs’ abilities to not only survive but thrive, where their innovation can demonstrably add genuine value to industry operations. The ERDi Testlab initiative will position the Australian energy resources sector as leaders on the global stage in the development, testing, commercialisation and implementation of Industry 4.0 interoperable technologies and operating models. It will also support the development of a growing Australian advanced technology sector. The UWA energy and resources sectors focussed Testlab will address: Capability and Leadership: • Work Skills for the Future – these combined projects will deliver new training capabilities required to upskill the workforce to design, implement, support and realise value of Industry 4.0 interoperable capabilities and operating models. • Enabling Effective Collaboration – The Lab will enable collaboration between technology vendors, mining and oil and gas companies, both in Australia and internationally via Open Process Automation Forum and future international lab collaborations.


Business and Operating Models, Technology and Services: • New Markets, New Technologies and New Business Models – Interoperability enables new business models across the value chain and enables the advancement of new technologies. • Commercialisation and R&D – The lab enables technology vendors to build their solutions to enable them to integrate with other vendors solutions ‘out of the box’, thus enabling easier commercialisation of products that can more seamlessly be integrated into real operations. Furthermore, the lab provides a facility for Research and Development in Industry 4.0 technologies, acting as a catalyst for innovation and this is open to industry and technology vendors of all sizes. • Efficient Operations and Maintenance – One of the greatest benefits of interoperability is the ability to optimise the information exchange between various discrete processes or departments. This enables more efficient and effective operational and maintenance performance overall.

Open Industrial Interoperability Ecosystem NERA is working with MIMOSA81 and the Asset Institute to form the Open Industrial Interoperability Ecosystem (OIIE) Australian Working Group. As a truly national initiative, leveraging substantial interoperability knowledge in centres such as the University of South Australia and collaborating with the Industry 4.0 ERDi testlab, the OIIE provides Australian energy sector participants with a consistent framework for digital transformation and interoperability, where the required technical specifications are provided by supplier-neutral industry standards and corresponding, formal international standards. This will enable participants of all types (suppliers, end-users and academia) to share a common digital ecosystem in a mutually beneficial manner, stimulating innovation without being captive to proprietary approaches developed by large, globally dominant suppliers. The OIIE specification is developed and managed by MIMOSA in cooperation with multiple other industry standards associations, and it is also the basis for ISO TS 18101, providing interoperability specifications for both the energy sector and other asset intensive industries.

Through active participation in the development of these critical new standards, Australian industry will have the opportunity to ensure they are ahead of many other jurisdictions and able to get the best value from future investments.

Western Australian Data Science Innovation Hub Start-ups and businesses are working with universities and the Western Australian Government as part of the Curtin University-led Western Australian Data Science Innovation Hub, ensuring the State remains at the forefront of digital and internet technologies and connected to other state and national data science initiatives. The Western Australian Government allocated $800,000 to establish the WA Data Science Innovation Hub at Curtin University, which was launched in October 2018. NERA has joined the Hub, which is connecting industry to universities, transferring knowledge across various sectors impacted by digital disruption including mining, oil and gas, and agriculture.

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Participants in the Working Group will help shape the OIIE and ISO 18101, ensuring that it addresses Australian industry priorities, which will be included as requirements for OIIE Use Cases. These OIIE Use Cases will then be validated in upcoming phases of the OIIE OGI Pilot, where Australian energy sector participants will be able to demonstrate their ability to add innovation and value to both Australian and Global industry.


06 NERA’s strategic priorities

EX Rated Robotic Crawler With NERA’s support, Perth-based SME Nexxis and CSIRO’s Data61 are commercialising an inspection robot that can undertake confined-space and hazardous inspections in areas that are either dangerous or inaccessible for humans. The project is bringing together the science and commercial worlds to support the growth of Australia’s robotics industry. This technology will be available for use across all facets of the energy resources sector and other industries nationally and internationally. Established in 2014 with a workforce of three, Nexxis has now grown to 40 full-time staff and has doubled in the last 12 months, opening new offices in Singapore and Houston. NEXXIS is an example of an Australian SME commercialising Australian research and keeping the IP in Australia, positioning Australia as a world-leader in automated robot inspection research and advanced manufacturing and an export market for EX-rated technology. To enable future work skills and capability, Nexxis is establishing a Registered Training Organisation (RTO) to provide training as the technology deploys. Nexxis is also aspiring to establish a Robotic Technologies Testing and Training Hub (lab61) in Western Australia, upskilling the workforce and demonstrating technology in a live environment.

Using Data to Unlock Australia’s Resource Base NERA has partnered with The University of Queensland (UQ) Centre for Natural Gas and industry operators to commercialise leading research that will improve the accuracy of the resource models used in the coal seam gas (CSG) industry, contributing to more cost-effective resource planning. To identify potentially untapped resources, Australia’s CSG industry relies on a technique that uses mathematics and statistics to estimate where gas and water might be located through a process known as geostatistical modelling.

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NERA’s funding support has helped UQ develop a new technique based on asymmetric copulas, which increases the accuracy of the reservoir modelling. The technique has been built as a new plug-in for commercialisation on the Petrel Software Platform, the most common modelling package for the prediction of gas reserves and production in Australia. Once completed, CSG stakeholder companies will be able to use the plug-in and its results to increase efficiency in production and decrease the risk associated with flow connectivity. There is also potential to transfer the learnings of the project into the mining sector especially for vein deposits and hydrogeology modelling.

Machine Learning Based Sub-Surface Asset Model NERA is supporting an industry–research collaboration between Origin Energy and the University of Sydney to develop a machine learning approach to CSG exploration and development through prototyping and demonstration of a data-fused, Bayesian, sub-surface asset model for net pay prediction. A data fusion model will be developed based on Origin Energy’s sub-surface data to better analyse the limitations and opportunities of the coal seams, enabling real-time data reconciliation of static and dynamic geological models; improving asset development planning; expanding the capabilities of the geologists, geotechnical engineers and field development teams; and improving utilisation of the resources net pay. The project has the potential to unlock significant future resources whilst minimising expenditure through enhanced drilling operations. Upon completion of the project, the model may be commercialised as an integration for the Petrel Software Platform, enabling easy adoption by the wider industry.

Remote Operations Terrestrial sectors such as energy, mining, agriculture, defence and space have reaped benefits from bilateral collaboration. Australian Remote Operations for Space and Earth (AROSE) is an industry-led, government-supported consortium of organisations from these sectors that all have an interest in promoting and developing the technologies and workforce required to advance Australia’s ability to remotely operate assets.


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06 NERA’s strategic priorities

6.2 Drive collaboration across industry sectors Sharing knowledge, technologies and innovative solutions across leading industries such as space, energy, emergency services, mining, agriculture, advanced manufacturing, medical and defence, is critical to Australia’s global competitiveness, creating market scale for local supply chains and long-term prosperity for all. The transformation of Australia’s economy requires a national strategy that does not back ‘winners’ but rather supports collective experimentation, continuous learning and adaptation and a multi-pronged approach across key sectors.

Australian Remote Operations for Space and Earth (AROSE) AROSE aims to take Australian world-leading technology and through multi-lateral collaboration, find new applications, both in space and on earth. In 2020, a study funded by NERA and AROSE will undertake an in-depth national review of advanced technology and capabilities in the field of remote operations as applicable to the resource industry and space industry. The aim is to develop an independent technology and capability baseline report to catalyse cross-industry growth in remote operations and ready Australian business for the emerging global markets for this technology. Importantly, the baseline report will provide further opportunities to include deepening R&D and industry collaboration, supporting technology and growing high-value SMEs and supply chains and assisting them to go global.

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Quantum TechX NERA is a foundation partner in this exciting initiative for innovators, SMEs and start-ups. Quantum TechX is built around identifying technology-centric solutions that benefit multiple sector problems in oil and gas, mining, agriculture, defence and space. The program engages across these sectors in aligned roadmaps that bridge automation, remote operations, digital communication, cyber, AI and data, and facilitates the cross-sector exchange of knowledge, innovation, capability and technology.

Further information can be found under Strategy 4 – Supply Chain and SME Growth.

Sixth Wave Alliance (SWA) NERA is a founding member of the SWA, which connects Australian industry, research and government collaborators in order to promote and facilitate the adoption and creation of robotics and automation technology for the benefit of Australia. SWA aims to integrate key robotics research organisations and industry partners in Australia and provide a framework that enables a high level of R&D collaboration among the partner institutions, leveraging existing programs and investments. This allows the SWA to target large-scale, national problems of strategic and commercial relevance to Australia and internationally, far beyond what individual robotics research groups in the country can achieve. The Alliance directs its efforts on a range of industries primed for transformation through autonomous technologies. These include defence, agriculture, oil and gas, mining, transport, and smart cities.


Digital and Technology Projects Many of NERA’s digital and technology projects drive innovation and cross-sector collaboration through the development of advanced technologies that may be applied across multiple industries. The NERAsupported WA Data Science Innovation Hub uses data to solve complex business and societal challenges across multiple industries that are experiencing digital disruption such as mining, oil and gas, and agriculture. The ERDi Testlab will bring together the mining and energy sectors to enable the widespread adoption of digital Industry 4.0 technologies into the production and processing of Australia’s energy and resources.

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NERA collaborated with technology innovator SPEE3D, Charles Darwin University and ConocoPhillips to develop a new high-speed, low-cost metal 3D printing technology. The technology can operate around 1,000 times the speed of conventional metal 3D printing at a fraction of the cost and has the potential to revolutionise industrial activities in remote areas by allowing onsite metal part production and removing the costly delays involved with sourcing materials from far afield. With NERA’s help, SPEE3D’s technology has already crossed into other industries including defence and space to help other sectors solve complex problems using Australian owned and developed technology.


06 NERA’s strategic priorities

6.3 Support technology led solutions in hybrid, hydrogen, carbon capture and storage and carbon utilisation to decarbonise the economy and ensure access to affordable and reliable energy for all Australians Hydrogen As outlined earlier in this report, in December 2019 the COAG Energy Council launched a National Hydrogen Strategy. The National Hydrogen Strategy forecasts a cautiously optimistic scenario that could see an Australian hydrogen industry generate about 7,600 jobs and add about $11 billion a year in additional GDP by 2050. Whilst the global hydrogen economy is still embryonic and will develop and mature over the next two decades, action is required now to ensure Australia captures the significant opportunity to help shape the production and use of hydrogen and becomes a leading source of hydrogen knowledge and solutions. It addresses the whole hydrogen value chain from production, storage, transport to applications/utilisation. To overcome barriers to market activation, action is needed to build the scale and capabilities of Australia’s hydrogen industry start-ups, scale-ups and SMEs and help them commercialise their intellectual property (IP) here in Australia. The National Hydrogen Strategy tasks NERA to support Australian SMEs to take advantage of opportunities in the hydrogen industry by forming an industry-led hydrogen cluster.

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Further information on NERA’s contribution to the development of a National Hydrogen Cluster can be found under Strategy 5 – Clusters and Export Hubs.

Carbon Capture, Utilisation and Storage (CCUS) Carbon Capture, Utilisation and Storage (CCUS) and its supporting technologies will need to be an integral component of Australia’s approach to its hydrogen economy and activating the technology market. The International Energy Agency expects that CCUS will account for seven per cent of the cumulative emissions reductions needed globally by 2040.82 NERA has good linkages to Australia’s research organisations and industrial companies currently working on the application of CCUS. Organisations such as CO2CRC, CSIRO, ANLEC and Coal21 who are currently working on CCUS (using both industry and government funding) would be encouraged to become key contributors into the NERA Hydrogen Cluster. NERA supports the $51 million funding proposal submitted in December 2019 by CO2CRC Ltd to the Minister for Energy and Emissions Reduction, Hon Angus Taylor MP and the Minister for Resources and Northern Australia, Senator the Hon Matthew Canavan. The proposal is for $51 million over the period July 2020 to June 2025 (to be matched) to drive a viable ongoing future for CCUS research, demonstration and innovation.


CCUS and Enhanced Oil Recovery (EOR) Resource companies such as Santos and Bridgeport are exploring the use of CO2 into EOR in the Cooper and Surat Basins. In December 2019, the NERA Board approved funding for a strategic carbon CCUS project in partnership with CO2CRC Ltd and oil and gas companies. The project, which will likely commence in April 2020, will examine the economic and technical feasibility of CCUS and the potential of using CO2 in EOR for all prospective onshore and offshore basins in Australia. The study has the potential to bring to the Australian energy market what are currently marginally economic resources, and will comprise of two main tasks:

Task 1 screening all prospective onshore and offshore basins in Australia for their potential for CO2-EOR and associated CO2 storage.

Task 2 a detailed field-level study to assess the technical feasibility of applying CO2-EOR and CO2 storage in Australia’s onshore oilfields (priority will be given to the Cooper and Surat Basins). This includes estimating oil recovery and CO2 requirements, identifying viable CO2 sources, performing screening-level economic analysis and exploring supportive policies, incentives and regulations. The study will provide a comprehensive understanding of the potential for CO2-EOR to: • Advance energy production and enable the recovery of an additional 15–20 per cent of the original oil from mature oil assets. The outcomes from the study will provide a better understanding of the overall increase in productivity from these fields. • Enable the oil and gas and resources industry to make deep reductions in greenhouse gas emissions. The development of CO2-EOR will require the use of CO2 capture from industrial and power plant emissions.

Use of large scale-solar in LNG facilities has to date not been attempted due to questions of cost, reliability and maturing regulatory environment, as well as difficulty in obtaining appropriately sited solar resources. NERA is in the process of approving support for a study to investigate the potential of integrating large scale solar as a major power supply for LNG processing facilities. The proposed study will draw on expertise from LNG plant operations, solar proponents, academia, government and regulators to identify technical barriers and solutions while providing a logistical and regulatory blueprint for LNG facilities looking to offset their power use with large-scale solar power. This unique study aims to provide a world-first blueprint for LNG facilities to increase efficiency and competitiveness with potential for other large industrial facilities using gas for power generation. This will in turn provide opportunities for a huge range of businesses in the supply chain such as solar proponents, whilst addressing key community concerns about the energy sector through clean energy solutions.

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Solar LNG Study


06 NERA’s strategic priorities

6.4 Accelerate supply chain development and SME growth NERA’s SME Strategy aims to have more SMEs accessing local and global supply chains by providing funding assistance, business capability programs and networking and mentoring opportunities to assist start-up and scale-up Australian innovators to commercialise their technologies locally and globally. Building the capacity and capability of SMEs and accelerating their commercialisation will in turn improve global competitiveness and attract new investment into Australia.

Quantum TechX Quantum TechX provides innovators, SMEs and late-stage start-ups with industry mentoring, facilitated market engagement, profile raising, staff development and introductions to new customer and sector networks. The program’s SME Incubator will nurture innovation and create competitive advantage in companies with significant potential to scale and catalyse significant economic growth. SMEs will participate in leadership events on converging technology streams that extend Australia’s existing competitive advantage and will contribute ‘Showcase’ events, which will highlight innovation in the crosssector application of key technology roadmap enablers.

Australasian Oil and Gas Conference and Exhibition (AOG)

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Hosted in Perth each year, the Australasian Oil & Gas Exhibition & Conference (AOG) is the platform event for the Australian oil and gas industry. The event features over 300 exhibiting brands from Australia and the world and attracts over 8,000 delegates. At successive AOG conferences, NERA has delivered programs and events that improve business engagement between supply chain proponents and showcase innovative start-up companies to potential clients. A process of learning from experience and extensive feedback from participants, partners and other stakeholders has seen NERA’s contribution to AOG continuously improve to become a recognised and highly valued exhibition space featuring dynamic and collaborative programs, workshops and events for SMEs in a space that encourages collaboration and innovation in the oil and gas supply chain. NERA’s AOG program has steadily increased engagement with the SME sector, raised awareness of opportunities in the oil and gas supply chain, built capability in the start-up sector, showcased new technologies, and built linkages between operators, contractors, entrepreneurial SMEs and the research sector.


Global Tech Xchange The Global Tech Xchange provided a unique partnership between Aberdeen (United Kingdom), Houston (USA), and Perth (Australia), to provide global market-access and investment opportunities for start-ups. This strategic partnership brought together the Oil & Gas Technology Centre’s (OGTC) TechX, Station Houston and NERA to link three global energy ecosystems and accelerate international growth for technology innovators and start-ups. Leveraging the Tech Xchange ecosystem on a global platform, the program facilitated access to the market including field trials, customer validation and analysis. It also increased exposure to early-stage investment markets, which is critical for fast-growing high-potential businesses. In 2020 NERA hosted cohorts from the United Kingdom as part of the program. The program was anchored by AOG and featured field trips highlighting Australia’s strengths in resources, space and remote operations, and meetings with potential clients.

Export Hubs

AOG Exhibition & Conference

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Export hubs are collaborative business-to-business networks that help small businesses harness opportunities in global marketplaces. The Initiative aims to help Australian SMEs to grow, export and increase local and regional jobs and builds on learnings from Industry Growth Centres clustering activities. NERA was delighted to see Toowoomba and Surat Basin Enterprise’s (TBSE) Southern Queensland SME Export Hub application successful in Round 1, and will continue to support future applications from other energy resources clusters.


06 NERA’s strategic priorities

6.5 Develop business capability and capacity and support industry clusters and export hubs A cluster is usually formed from a concentration of enterprises (including technology SMEs) and related research and knowledge entities linked by common interests, challenges and technology or other market opportunities. Clusters can have different preconditions and potential, and the governance models can vary dependent on the scope and needs. They can be small or large and the participants can be in a regional, national or international position. Clusters help SMEs, researchers and governments collaborate and innovate to tackle common challenges that they could not achieve on their own. The members of a cluster need to have a strong commitment to collaboration, sharing and a level of interdependence. Clusters provide a central and easy to identify point of connection for other potential collaboration partners and end-users. They support the development and scaling of industry supply chains. International experience is that the early phase of identifying and bringing together an industry- and technology-focussed community and fostering early collaboration and innovation requires significant government and other support. Different cluster models are emerging across the country as Australia seeks to diversify the economy and adopt advanced AI, automation and robotics technologies and new industry sectors such as space, remote operations and hydrogen. NERA is leading development of three clusters – Hydrogen, Subsea (SICA) and Ocean Energy (AOEG) – and provided support to other collaborative industry-led consortiums, including the Sixth Wave Alliance and AROSE.

Hydrogen Industry Cluster

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The NERA Hydrogen Industry Cluster will build capabilities and drive industry collaboration across the value chain to help maximise the economic benefits by ensuring Australian companies are well placed to supply new technology, products and services. The Cluster will create a technical forum for high value technology development in city and regional hubs. Founding cluster partners will come from leading energy resource organisations, including from the LNG industry, research institutions, innovators and importantly would provide vital support for start-ups, scale-ups and SMEs drawn from across Australia and connected to the local and world hydrogen opportunities.

International Collaboration NERA will work to forge strong linkages and partnerships to countries that are leading the way in building a clean hydrogen economy, such as the Netherlands and Norway. The Netherlands are leading the way with large-scale offshore wind for hydrogen production and injection into their gas networks and storage in salt caverns. They are currently one of the largest conventional natural gas producing regions in Europe through their Northern Groningen/Slochteren gas field. This gas field is, however, reaching maturity and at the same time external factors are having a negative impact on production (e.g. subsidence and earthquakes). With the additional commitments to meet the Paris Agreement targets, the Netherlands and the gas field region has identified hydrogen as an important future driver of the regional economy. Comparative advantages in moving to hydrogen production (for local use within the Netherlands and export into Europe) include substantial local gas transmission infrastructure; strong local skills in chemical engineering and the gas industry; and a substantial local renewal energy resource which is beginning to produce more output than the local electricity transmission infrastructure can handle. Norway also has some leading projects, for example the H2M project, a collaboration between Nuon, Equinor and Gasunie. Nuon has set the goal of converting a 440 MW unit of its Magnum power plant (located in Eemshaven in the province of Groningen) to hydrogen. Equinor will develop an auto-thermal reforming (ATR) plant where hydrogen will be produced from natural gas that is imported from Norway and the CO2 is captured. This hydrogen will be transported to consumers via infrastructure developed by Gasunie. The goal is to integrate a salt cavern to enable system flexibility. The CO2 will be shipped back to Norway and stored offshore. See Cappellen, Croezen and Rooijers, CE Delft, July 2018: Feasibility study into blue hydrogen.


Hydrogen Standards NERA is a nominating organisation for membership of the new Hydrogen Technologies Committee established through Standards Australia as a key enabler to drive national agreement and recommendations on the standards applying to the emerging hydrogen industry and to influence the development of international standards. NERA’s nomination has been elected as the inaugural Chair of the Committee. The new ME-093 Hydrogen Technologies Committee is mirrored to the International Standards Organisation (ISO) Technical Committee 197. This will ensure that the development of Australia’s local hydrogen industry is aligned to and, importantly, can influence the development of these global standards. This will also facilitate trade and will ensure the opportunity to transition to a low-carbon economy through hydrogen can be achieved safely and that the economic, environmental and social benefits of the new industry are fully realised.

Subsea Innovation Cluster Australia (SICA) Backed by NERA and with important support from industry, SICA is a unique business model created by the collaboration of Australian subsea technology innovators, operators, service companies and research institutions to address challenges specific to the Australian oil and gas subsea industry.

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SICA’s vision is to create accelerated sustainable growth and value creation by bringing together companies across the entire subsea value chain, fostering collaboration and innovation initially for the subsea inspection, maintenance and repair (IMR) sector, both in the regional market and worldwide.


06 NERA’s strategic priorities

Australian Ocean Energy Group (AOEG) NERA is supporting the Australian Ocean Energy Group (AOEG) – an industry-led cluster formed to facilitate industry collaboration across the ocean energy industry to create significant value for Australia. The founding partners include leading energy organisations, Australian research institutions, plus innovators and SMEs drawn from across Australia and the world.83 NERA’s project funding and industry support is providing the important catalyst to attract engagement and collaboration with Australia’s energy sector and adding ocean energy to Australia’s future energy mix. The following are some of the key ocean energy projects that will be implemented for Australia in 2020: • Development of a ten-year Ocean Energy Roadmap: This strategic industry document will outline opportunities to accelerate ocean energy technology development in Australia as a commercial, stable and viable low-carbon energy source, suitable for multiple industrial and community applications. In developing solutions to meet Australia’s unique set of circumstances, the Ocean Energy Roadmap also recognises the opportunity for the Australian ocean energy sector to serve global markets, and deliver new technologies, approaches and/or supply chain capabilities. • Aquaculture/Ocean Energy Market Assessment AOEG: in collaboration with CSIRO and Avil Allen Consulting, are submitting a project proposal to the Blue Economy CRC to undertake a market analysis of the commercial potential for ocean energy as part of the decarbonisation of the offshore aquaculture and fishery industries. • Analysis of ocean renewable energy uptake for the energy-intensive industrial sectors of Australia’s Blue Economy (study). This is a graduate research project conducted under the direction of AOEG. The graduate intern is co-funded by CSIRO and Climate-KIC Australia. There is a significant additional opportunity to support coastal, offshore and island communities, including tourism operations, to build greater self-sufficiency, resilience and disaster recovery capabilities across energy, fresh water, small-scale hydrogen and other additional externalities, such as oxygen for improved wastewater treatment. The opportunity is from integrated micro-grid systems. By creating not just a micro-grid but also an integrated micro-grid, i.e. a grid which supports multiple sources of renewable energy and which can meet the load demand of various modular technologies (e.g. hydrolyzers, desalination units, wastewater treatment units), communities can enjoy numerous complementary and ancillary benefits from harnessing the water and energy from Australia’s oceans.

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Australia has numerous potential competitive advantages (ocean resource, research, technology, manufacturing), as well as geographical proximity to key end-user markets, which could see Australia secure a global market leadership position in this niche but significant sector. Ocean energy can play a significant role in supporting coastal and island communities, including tourism resorts who are unable to connect to a large-scale grid and/or would seek to: • reduce their reliance on a large-scale grid • stabilise/integrate the use of solar/wind • decarbonise both their energy and their fuel sources (diesel replacement) • utilise other potential by-products of ocean resources (hydrogen and oxygen) • void over-head electricity transmission systems • ensure disaster recovery capabilities (extreme weather/fire/drought/flooding). The global micro-grid market is estimated to reach $US18 billion in 2022, with the demand in the AsiaPacific to grow the quickest (cumulative annual growth rate of 18 per cent from 2017–2022) due to the strong interest in micro-grids in Japan, Indonesia and other island-nations in the region.84


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MAKO Tidal Turbines – tidal energy technology


06 NERA’s strategic priorities

6.6 Support independent science, data, R&D and innovation to improve industry’s environmental, safety and social performance In 2020, NERA will continue to engage with universities and research organisations on projects and initiatives, which have a critical role in underpinning the knowledge economy. They explore and identify new frontiers, new technology developments, new techniques and trials, create new methodologies and provide independent sources of trusted data.

Oil and Gas Industry Research and Innovation Priorities From 2020, NERA will work with the oil and gas industry to build on the decommissioning research, knowledge and technology strategy, and seek to define a program of research and innovation priorities that combined will ensure the sector continues to deliver economic, environmental and social benefits for Australia, including access to clean, reliable and affordable energy. NERA’s approach will continue to emphasise: • Collaboration and partnerships • Industry-led and practically applied research and innovation • Knowledge transfer (including discovering existing research and innovation being undertaken across all industry sectors that could be rapidly adapted and adopted in oil and gas)

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• Sustainability • Data-driven decision making • SME engagement • Workforce of the future If the consultations with the industry are successful, NERA will establish a national oil and gas industry research forum and a plan to implement the above.


CRCs and CRC-Ps Cooperative Research Centres (CRCs), and Cooperative Research Centre Projects (CRC-Ps) and Industry Growth Centres work together to be a catalyst for increased and more productive industry–research engagement. NERA and other Growth Centres provide a key part of the assessment process and greatly assists the CRC Advisory Committee in its assessment of applications and in formulating its recommendations for funding to the Minister for Industry, Science and Technology. NERA has had some success with the CRC program, with, for example, the CRC for Future Fuels, MinEx CRC, CRC for Blue Economy and CRC for Future Battery Industries all successful in the last few rounds. NERA is supporting the Australian Ocean Energy Group Cluster (AOEG), which is a member of the Blue Economy CRC, and has been an active supporter and funder of the early development phase of a proposed Future Energy Exports CRC.

Micro LNG Facility NERA provided funding to support the front-end engineering design (FEED) for the development of a micro-scale LNG futures facility to be built in Western Australia. Led by the University of Western Australia, the LNG Living Lab will be a national, open-access resource – a globally unique platform to demonstrate new technologies in a live plant environment. The proposed facility is one of the centrepieces of the proposed Future Energy Export Cooperative Research Centre (FEnEx CRC) which, if successful, plans to combine the core research themes of LNG production optimisation through the micro LNG facility with research into processing and delivery of hydrogen with additional work to understand digital technologies and interoperability through the Industry 4.0 ERDi testlab and research into a better understanding of the energy marketplace. In 2019 NERA welcomed the announcement by Western Australian State Premier Mark McGowan to commit $10 million towards the development of the facility as part of the proposed FEnEx CRC. The funding commitment from the Western Australian State Government through the Premier’s LNG Jobs Taskforce will help accelerate the delivery of the facility and maximise its ability to commercialise innovations developed by Australia’s world-class LNG industry.

Natural Gas Research to Unlock Gas Resources Australia’s gas resources create the potential for the country to be a major global supplier of natural gas to help meet the increasing demand for cleaner, affordable energy over the transition decades to a lowemissions future. To move beyond current commitments still requires a growth in gas supply. Australia has extensive natural gas resources and has focussed considerable research investment into developing cutting-edge technologies to optimise the sustainable production of natural gas. New technologies are required to produce gas from large reserves that are currently too difficult or too expensive to access. Through research projects led by the University of Queensland’s Centre for Natural Gas in collaboration with NERA and industry participants, research is being undertaken to improve efficiency and potentially untap resources in the natural gas industry.

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Leveraging, at a national level, the synergies of LNG and hydrogen production research alongside digital technologies and a better market understanding has the potential to accelerate Australia’s production and productivity in these critical sectors but is not possible without substantial investment and longterm commitment. Undertaking the FEED for the LNG micro facility was an early precursor to what may become a flagship initiative for Australia’s current and future energy landscape.


06 NERA’s strategic priorities

6.7 Establish Australia as global leader in life extension, repurposing and decommissioning of energy resources infrastructure As discussed under Strategy 5 on clusters, NERA has facilitated and funded the formation and development of two industry-led offshore energy, engineering and infrastructure related clusters: a subsea oil and gas cluster (Subsea Innovation Cluster Australia (SICA)) and an ocean energy cluster (Australian Ocean Energy Group (AOEG)). Additionally, we are working on the potential for an offshore oil and gas decommissioning supply chain cluster. NERA is also working closely with offshore engineering and infrastructure related projects, including the Blue Economy Cooperative Research Centre (CRC). AOEG is a member of the Blue Ocean Economy CRC, which is focussed on delivering innovative solutions that will transform the way we use our oceans, through expertise in the seafood, marine renewable energy and offshore marine engineering sectors. NERA will facilitate an Offshore Hydrogen Workshop at the Asian Wave and Tidal Energy Conference to be held in Hobart in November 2020. NERA has formed global links to the UK’s ORE Catapult and the ORCA Hub (subsea robotics), and is in discussions with Norway, Canada, the Netherlands and the UK around the potential for a globally connected offshore marine energy cluster network. In addition, NERA’s project funds are supporting a number of overlapping offshore engineering and infrastructure industry opportunities. For example:

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• In-Water Hull Cleaning Technology Perth-based marine innovative SME CleanSubSea are integrating image-recognition and AI technology into their Envirocart – one of the world’s first in-water hull-cleaning systems to remove marine growth from ocean vessels. The technology is WA owned and patented. Until now, industries have combated marine growth by dry-docking their fleets in Singapore. Through this project, the Envirocart can clean and scan a ship’s hull simultaneously, detecting hull damage and defects while the vessel remains in the water. With Envirocart there is no need for dry-docking in Singapore, reducing carbon emissions and keeping jobs and industry in Australia. This project is applicable to multiple industries including defence, cargo and fisheries. • TASER – Subsea Living Laboratories Four ‘living laboratories’ have been designed to help Australia’s oil and gas industry tackle the sectorwide costs incurred from operating in Australia’s challenging warm water environment. With funding support from NERA, these living laboratories have been created by some of Australia’s leading subsea researchers, operators and equipment engineers. These state-of-the-art facilities are busy testing dozens of innovative products and subsea coating technologies designed to help our offshore energy sector tackle the multi-million-dollar challenge of equipment performance and reliability.

Life of Offshore Oil and Gas Infrastructure Most existing energy infrastructure assets are designed and built to last for decades. Eventually, however, this infrastructure will reach the end of its commercial life for producing hydrocarbons. Various methods can be used for aged infrastructure, including repurposing of an asset, which involves using the asset for a purpose other than its original intended use (e.g. repurposing natural gas pipelines to transport other gases, such as hydrogen), and decommissioning, which involves returning a site to its original state prior to development, including removing structures, decontamination, and site restoration. In 2020, NERA is working with industry to review both options.


Energy Transition In 2020, NERA is supporting a study to investigate the opportunity for offshore oil and gas structures to be repurposed at end-of-life to produce renewable energy (for consumption offshore or transmission onshore), facilitate hydrogen production and transportation and to facilitate carbon dioxide storage in exhausted petroleum reservoirs. This study will provide a potential route for maximising the long-term use of existing assets to support energy transition in Australia. It will boost competitiveness of the energy resources sector by being an early adopter, globally, of innovative repurposing initiatives. If proved to have significant potential a resulting project will place Australia at the forefront of the global drive to decarbonise oil and gas and maximise use of existing infrastructure.

Decommissioning In 2019 NERA focussed on understanding stakeholder perceptions of the outlook for decommissioning in Australia. In 2020 we are focussing on building on these stakeholder perceptions by quantifying ‘what’, ‘when’ and ‘how’ decommissioning will occur in Australia over the coming decades. Our understanding of these components of decommissioning will support improved understanding for SME and technology providers of the capabilities and capacities that will need to be matched to decommissioning in Australia. Specific actions underway include: • Investigating the scale, timing and cost of decommissioning in Australia, including the scale and opportunities for cost reduction. • Exploring the concept of collaborative approvals for decommissioning, to streamline approval timeframes, promote consistent operator practice and encourage cost sharing measures such as vessels of opportunity or multi-asset decommissioning campaigns.

The National Decommissioning Research Initiative (NDRI) is a major project delivered by NERA on behalf of eight industry partners. The NDRI will deliver independent and credible research that provides data to support robust industry decommissioning decisions. Specifically, the NDRI is investigating the influence of structures in the marine environment, including in relation to ecosystem values, connectivity and invasive marine species. It is also investigating degradation rates of metals and non-metals and the impact of contaminants on the marine environment.

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• Charting decommissioning challenges for industry and the potential opportunities for technology and innovation solutions to support improved efficiency in Australia.


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Conclusion

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07


07 Conclusion In this current climate of uncertainty and instability due to COVID-19, it has never been more vital to sustain innovative, resilient, adaptive and globally competitive critical industry sectors. The energy sector has been deeply affected by this crisis but, as a key enabler of modern life, its continued resilience has never been more crucial to power global and local response and recovery efforts that now are taking place. Across our energy resources sector, and indeed the wider economy, many companies are still assessing the size and scale of the impact, while others have made significant announcements to radically scale back, defer or cancel planned projects in Australia as a direct result of the pandemic. As Australia’s Industry Growth Centre for the energy resources sector, NERA is uniquely positioned to support sector-wide transformation towards a smart, high-value and low-carbon energy future. Our role continues to deliver value back to the national economy through our industry brokering role and the source of insight into challenges, solutions, skills and regulation that will ensure Australia maximises its huge energy resources advantage and becomes a global energy powerhouse. Through continued Australian Government support for NERA and our identified pipeline of projects and initiatives, we can continue to maximise the value to the Australian economy by developing an energy resources sector that is globally competitive, sustainable, innovative and diverse and unlock +$10 billion of new value for the Australian economy.

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Throughout 2020, NERA will continue to work with the Australian Government, Industry Growth Centres and all our stakeholders to support advanced and low-emissions technologies, strengthen businesses and jobs in this time of crisis and sustain a resilient energy resources sector for the benefit of all Australians.


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2 AlphaBeta, “Staying ahead of the game.” [Online]. Available: https://www.nera.org.au/Publications-and-insights/ Staying-ahead-of-the-game 3 World Resources Institute, “CAIT Climate Data Explorer, GHG Emissions by Sector.” [Online]. Available: http://cait.wri. org/historical/Country%20GHG%20Emissions?indicator[]=Energy&indicator[]=Industrial%20Processes&indicator[]= Agriculture&indicator[]=Waste&indicator[]=Land-Use%20Change%20and%20Forestry&indicator[]=Bunker%20Fuels &year[]=2014&sortIdx=NaN&chartType=pie 4 Department of Treasury, “Economic response to the Coronavirus.” [Online]. Available: https://treasury.gov.au/sites/ default/files/2020-03/Overview-Economic_Response_to_the_Coronavirus_1.pdf 5 Department of Treasury, “Economic response to the Coronavirus.” 6 Department of Treasury, “Economic response to the Coronavirus.” 7 IEA, “The coronavirus crisis reminds us that electricity is more indispensable than ever.” [Online]. Available: https:// www.iea.org/commentaries/the-coronavirus-crisis-reminds-us-that-electricity-is-more-indispensable-than-ever 8 Department of Treasury, “Economic response to the Coronavirus.” 9 IEA, “Energy market turmoil deepens challenges for many major oil and gas exporters.” [Online]. Available: https:// www.iea.org/articles/energy-market-turmoil-deepens-challenges-for-many-major-oil-and-gas-exporters 10 Office of the Chief Economist. “Resources and Energy Quarterly” March 2020. 11 Electric Power Research Institute, “COVID-19 Bulk System Impacts: Demand Impacts and Operational and Control Center Practices.” 2020. 12 S&P Global Platts, “Italian power, gas demand slump illustrates how coronavirus has crippled industry.” [Online]. Available: https://blogs.platts.com/2020/03/20/italian-power-gas-demand-coronavirus-industry/ 13 Office of the Chief Economist. “Resources and Energy Quarterly” March 2020. 14 S&P Global Platts, “More mine closures, bankruptcies to come as demand drops during coronavirus pandemic,” 26 March 2020. [Online]. Available: https://www.spglobal.com/platts/en/market-insights/latest-news/coal/032620more-coal-mine-closures-bankruptcies-to-come-as-demand-drops-during-coronavirus-pandemic-moodys 15 Rystad Energy, “COVID-19 set to wipe out global solar and wind project growth for 2020, slash new capacity from 2021.” [Online]. Available: https://www.rystadenergy.com/newsevents/news/press-releases/covid-19-set-to-wipeout-global-solar-and-wind-project-growth-for-2020-slash-new-capacity-from-2021/

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16 Rystad Energy, “COVID-19 set to wipe out global solar and wind project growth for 2020, slash new capacity from 2021.” 17 New Atlanticist, “The implications of the coronavirus crisis on the global energy sector and the environment.” [Online]. Available: https://atlanticcouncil.org/blogs/new-atlanticist/the-implications-of-the-coronavirus-crisis-onthe-global-energy-sector-and-the-environment/ 18 State of Play, “State of Play COVID-19 – Resources industry response to the global pandemic.” [Online]. Available: https://www.stateofplay.org/wp-content/uploads/2020/04/Full-Covid-19-Datapack-v2-2-XE-03Apr20.pdf 19 Department of the Environment and Energy, “Australian Energy Statistics, Table J.” [Online]. Available: https://www. energy.gov.au/publications/australian-energy-update-2019 20 Geoscience Australia, “Energy.” [Online]. Available: https://www.ga.gov.au/scientific-topics/energy/basics 21 Department of Environment and Energy, “Australian Energy Update 2019.” [Online]. Available: https://www.energy. gov.au/sites/default/files/australian_energy_statistics_2019_energy_update_report_september.pdf 22 Australian Bureau of Statistics, “Australian System of National Accounts: 5204.” [Online]. Available: https://www.abs. gov.au/AUSSTATS/abs@.nsf/DetailsPage/5206.0Jun%202019?OpenDocument 23 AlphaBeta, “Preparing Australia’s Future Oil and Gas Workforce.” [Online]. Available: https://www.nera.org.au/Attach ment?Action=Download&Attachment_id=248 24 Office of the Chief Economist. “Resources and Energy Quarterly,” March 2020. [Online]. Available: https:// publications.industry.gov.au/publications/resourcesandenergyquarterlymarch2020/documents/Resources-andEnergy-Quarterly-March-2020.pdf 25 Department of Environment and Energy, “Australian Energy Update 2019.” [Online]. Available: https://www.energy. gov.au/sites/default/files/australian_energy_statistics_2019_energy_update_report_september.pdf 26 Office of the Chief Economist. “Resources and Energy Quarterly” March 2020. 27 Australian Financial Review. “LNG Exports face $20b hit.” [Online]. Available: https://www.afr.com/companies/ energy/lng-exports-to-take-20b-hit-as-prices-to-nosedive-20200416-p54kcn


28 Australian Financial Review, “Investors applaud as Woodside ices $53 billion of LNG projects.” [Online]. Available: https://www.afr.com/companies/energy/woodside-puts-53bn-of-lng-projects-on-ice-20200327-p54efp 29 In Daily, “Santos slashes spending to combat virus, plummeting prices.” [Online]. Available: https://indaily.com.au/news/ business/2020/03/23/santos-slashes-spending-to-combat-virus-plummeting-prices/ 30 Australian Financial Review, “Beach Energy to reduce spending by 30pc.” [Online]. Available: https://www.afr.com/ companies/energy/beach-energy-to-reduce-spending-by-30pc-20200327-p54eg4 31 Office of the Chief Economist. “Resources and Energy Quarterly” March 2020. 32 IEA, “The coronavirus crisis reminds us that electricity is more indispensable than ever.” [Online]. Available: https://www. iea.org/commentaries/the-coronavirus-crisis-reminds-us-that-electricity-is-more-indispensable-than-ever 33 Electric Power Research Institute, “COVID-19 Bulk System Impacts: Demand Impacts and Operational and Control Center Practices.” 2020. 34 S&P Global Platts, “Italian power, gas demand slump illustrates how coronavirus has crippled industry.” [Online]. Available: https://blogs.platts.com/2020/03/20/italian-power-gas-demand-coronavirus-industry/ 35 International Energy Agency (IEA), “World Energy Outlook 2019.” [Online] Available: https://www.iea.org/reports/worldenergy-outlook-2019 36 Office of the Chief Economist. “Resources and Energy Quarterly” March 2020. 37 Office of the Chief Economist. “Resources and Energy Quarterly” March 2020. 38 Australian Institute of Petroleum, “Australian Crude Production and Refining.” [Online]. Available: https://aip.com.au/ resources/australian-crude-production-and-refining 39 Office of the Chief Economist. “Resources and Energy Quarterly” March 2020. 40 IEA, “Global oil demand to decline in 2020 as coronavirus weighs heavily on markets.” [Online]. Available: https://www. iea.org/news/global-oil-demand-to-decline-in-2020-as-coronavirus-weighs-heavily-on-markets 41 IEA, “Energy market turmoil deepens challenges for many major oil and gas exporters.” [Online]. Available: https://www. iea.org/articles/energy-market-turmoil-deepens-challenges-for-many-major-oil-and-gas-exporters 42 IEA, “World Energy Outlook 2019.” 43 Office of the Chief Economist. “Resources and Energy Quarterly” December 2019. 44 S&P Global Platts, “More mine closures, bankruptcies to come as demand drops during coronavirus pandemic,” 26 March 2020. [Online]. Available: https://www.spglobal.com/platts/en/market-insights/latest-news/coal/032620-morecoal-mine-closures-bankruptcies-to-come-as-demand-drops-during-coronavirus-pandemic-moodys 46 Minerals Council of Australia, “Untapped Potential, the Case for Nuclear,” 2019. [Online]. Available: https://minerals.org. au/sites/default/files/Untapped%20potential%20&%20The%20case%20for%20nuclear%20energy.pdf 47 Financial Times, “Uranium bucks weak commodity trend.” [Online]. Available: https://www.ft.com/content/031a25e8dfd3-4e00-9d63-00287fead8ff 48 Miningmx, “Uranium price revives as fears mount about COVID-19 impact on concentrated supply.” [Online]. Available: https://www.miningmx.com/trending/41051-uranium-price-revives-as-fears-mount-about-covid-19-impact-onconcentrated-supply/ 49 IEA, “Nuclear Power in a Clean Energy System,” 2019. [Online]. Available: https://www.iea.org/reports/nuclear-power-ina-clean-energy-system 50 IEA, “World Energy Outlook 2019.” 51 Clean Energy Council, “Clean Energy Report 2019.” [Online]: https://assets.cleanenergycouncil.org.au/documents/ resources/reports/clean-energy-australia/clean-energy-australia-report-2019.pdf 52 Clean Energy Council, “Clean Energy Australia Report 2019.” 53 Energy Matters, “Australia poised to export solar energy to Singapore.” [online]. Available: https://www.energymatters. com.au/renewable-news/australia-poised-to-export-solar-energy-to-singapore/ 54 British Petroleum. “Statistical Review of World Energy – Renewable Energy,” 2019 [Online] Available: https://www. bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy/renewable-energy.html 55 Rystad Energy, “COVID-19 set to wipe out global solar and wind project growth for 2020, slash new capacity from 2021.” [Online]. Available: https://www.rystadenergy.com/newsevents/news/press-releases/covid-19-set-to-wipe-out-globalsolar-and-wind-project-growth-for-2020-slash-new-capacity-from-2021/ 56 New Atlanticist, “The implications of the coronavirus crisis on the global energy sector and the environment.” [Online]. Available: https://atlanticcouncil.org/blogs/new-atlanticist/the-implications-of-the-coronavirus-crisis-on-the-globalenergy-sector-and-the-environment/

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45 IEA, “World Energy Outlook 2019.”


References 57 IEA, “World Energy Outlook 2019.” 58 OECD. (2015). The innovation imperative – contributing to productivity, growth and well-being, p. 11. 59 Innovation and Science Australia, “Stimulating business investment in innovation.” [Online]. Available: https://www.industry.gov. au/sites/default/files/2020-02/stimulating-business-investment-in-innovation.pdf 60 IEA, “Global Emissions Trends in 2019.” [online]. Available: https://www.iea.org/articles/global-co2-emissions-in-2019 61 IEA, “World Energy Outlook 2019. 62 CSIRO, “Australian National Outlook,” 2019. [Online]. Available: https://www.csiro.au/en/Showcase/ANO 63 APPEA, “Climate change in Western Australia Issues paper,” September 2019. [Online]. Available: https://www.appea.com.au/ wp-content/uploads/2019/12/APPEA-submission-Climate-change-in-Western-Australia.pdf. 64 IEA, “The Future of Hydrogen,” June 2019. [Online]. Available: https://www.iea.org/reports/the-future-of-hydrogen 65 IEA, “The Future of Hydrogen.” 66 COAG Energy Council, “Australia’s National Hydrogen Strategy.” [Online]. Available: https://www.industry.gov.au/sites/default/ files/2019-11/australias-national-hydrogen-strategy.pdf 67 CSIRO, “Australian National Outlook, 2019.” 68 IEA, “The Future of Hydrogen.” 69 IEA, “Carbon Capture and Storage,” 2020. [Online]. Available: https://www.iea.org/topics/carbon-capture-and-storage/. 70 Department of Resources, Energy and Tourism, Carbon Storage Taskforce 2009, “National Carbon Mapping and Infrastructure Plan – Australia: Full Report.” [Online]. Available: https://www.parliament.wa.gov.au/Parliament/commit.nsf/(%24lookupRelated DocsByID)/518FAC2BBA6C246648257C29002DB8E6/%24file/NCM_Full_Report.pdf 71 Santos, “Santos Cooper/Eromanga Basins CCUS.” [Online]. Available: www.energymining.sa.gov.au/__data/assets/pdf_ file/0011/335864/Christian_Winterfield_-_Santos.pdf 72 Office of the Chief Economist, “Resources and Energy Quarterly” December 2019. 73 AlphaBeta, “Preparing Australia’s future oil and gas workforce.” 74 Office of the Chief Economist, “Resources and Energy Quarterly” December 2019. 75 For examples of some of NERA projects, see https://www.nera.org.au/Publications-and-insights/Energy-futures-1. 76 AlphaBeta, “Staying ahead of the game.” 77 AlphaBeta, “Staying ahead of the game.”

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78 AlphaBeta, “Staying ahead of the game.” 79 AlphaBeta, “Preparing Australia’s Future Oil and Gas Workforce.” 80 UK Oil and Gas Authority, “UKCS Energy Integration: Interim Findings.” [Online]. Available: https://www.ogauthority.co.uk/ media/6257/ukcs-energy-integration-interim-findings.pdf. 81 https://www.mimosa.org/ 82 IEA, “Carbon Capture and Storage.” 83 For more information see: https://oceanenergygroup.org.au/. 84 GlobalData, “Microgrids, Update 2018 – Global Market Size, Competitive Landscape, and Key Country Analysis to 2022,” November 2018. [Online]. Available: https://store.globaldata.com/report/gdpe1057emr--microgrids-update-2018-globalmarket-size-competitive-landscape-and-key-country-analysis-to-2022/.


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Australian Resources Research Centre Level 3, 26 Dick Perry Avenue, Kensington WA 6151 ABN 24 609 540 285 1300 589 310 | contact@nera.org.au

nera.org.au @NERAnetwork NERA – National Energy Resources Australia

Profile for NERA (National Energy Resources Australia)

2020 SCP  

NERA's (National Energy Resources Australia) Sector Competitiveness Plan 2020 update.

2020 SCP  

NERA's (National Energy Resources Australia) Sector Competitiveness Plan 2020 update.

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