With the world’s third largest coal reserves and extensive natural gas and oil reserves, Australia has a strong history of using fossil fuels to not only meet its own energy needs but support those of neighbouring nations in Asia Pacific.

More than two thirds of Australia’s energy production is exported and, as recently as 2021, the country was the world’s largest exporter of both coal and LNG. Australia supplies more than 40 per cent of the LNG needs for Japan – a long-time trading partner that invested in the establishment of an Australian LNG industry in the 1980s – and is also a major exporter of gas to China and the Republic of Korea.

But in recent years the policy environment around both Australia’s domestic and exported energy has become unclear, causing concern among Asian customers.

Australia has a difficult balance to achieve. The country’s economic wellbeing must be protected in the short and medium term, which will depend on fossil fuel exports, while meeting new climate targets and managing strengthening activist pressures to move more swiftly to a carbon neutral future. Prime Minister Anthony Albanese has noted the importance of gas projects – both current and future – to “keeping the lights on” and meeting Asian LNG demand.

Renewable Energy

Under previous federal governments, Australia’s long-term plan had been to grow the contribution of renewable energy, while increasing the use of natural gas as a stable transition fuel with a lower carbon footprint than coal and oil to meet its commitments under the Paris Agreement. Successive 2020-21 and 2021-22 Federal Budgets were focused on a ‘gas-fired recovery’ from COVID-19. Simultaneously, government investment in new technology and efficiency would drive down emissions, while new low-carbon energy sources such as hydrogen were developed.

82%

renewable power generation by 2030

43%

reduction target in 2005 emissions levels by 2030 has now been legislated

AUD 20

billion Rewiring The Nation Fund to upgrade the national electricity grid in preparation

Australia's energy & climate goals in brief

  • Major LNG supplier to Asia since the 1980s
  • Legislated net zero target of 2050
  • Facing domestic energy security challenges
  • Great potential as a carbon storage location

Climate Targets

But the election of Mr Albanese’s government in May 2022 has accelerated timelines for several of Australia’s key climate targets. Under the Climate Change Bill passed by the Labor Government, a 43% reduction target in 2005 emissions levels by 2030 has now been legislated, as has the target of net zero emissions by 2050.

The government is also targeting 82% renewable power generation by 2030 and has introduced a AUD20 billion Rewiring The Nation Fund to upgrade the national electricity grid in preparation. Australia had already been planning a gradual phase-out of coal-fired power plants but again that process is being hastened under the Labor Government’s Powering Australia plan.

One of the possible ramifications of this accelerated transition is energy supply interruptions – a nearly unthinkable outcome for a nation that is so rich in energy sources. The Australian Energy Market Operator (AEMO) warned in a March 2024 report that unless the country’s eastern states were able to access more gas, they would likely have to use diesel to generate power in 2025 and 2026. Even in Western Australia, the traditional home of Australia’s LNG industry, there are fears of domestic gas shortages, particularly beyond 2030.

Australia’s domestic energy security, along with its ability to serve LNG demand from Asia, will rely on the development of large-scale gas projects that will operate into the 2030s and beyond. Woodside Energy’s Scarborough project, which has been boosted by significant Japanese investment, is one such operation that is expected to ship first gas by 2025. Santos’ Barossa project is another major export facility on a similar timeframe.

However, it’s notable that the path to production for both projects has been impacted by a lack of clarity around Australian off-shore regulatory processes, including disruptive court challenges after valid approvals had been granted.

Uncertainty over Australia’s regulatory regime has been a source of recent angst for Asian energy trading partners, with Japan being particularly vocal in expressing its worries.

Causes for concern have included reform to the Safeguard Mechanism (which requires Australia’s largest greenhouse gas emitters to keep their net emissions below a baseline level), attempts at a federal level to cap domestic gas prices and a log-jam in off-shore approvals that involved average assessment waits of 562 days for exploration applications and 400 days for development applications.

If this lack of regulatory clarity can be addressed and overcome and Australia continues to develop world-class gas projects, the positive impact on Asia’s energy landscape would be profound. Nations like Japan, South Korea, Singapore, Taiwan, Thailand and China will be able to depend on ongoing LNG supply, while newcomers to the LNG import arena – the likes of Philippines and Vietnam – will have access to a greater diversity of supply as they work to reduce their reliance on high-emitting coal.

There have been some encouraging signs. While a pledged streamlining of offshore approvals processes will now not be introduced to Federal Parliament until a later date, the Australian Future Gas Strategy (FGS) unveiled in May 2023 provides a welcome outline for Australian gas production to 2050 and beyond, supporting domestic power generation and industrial use and also meeting LNG demand from Asia.
Australia promises to be a strong source of low-carbon future fuels for Asia. Japan has committed more than $2 billion to a liquid hydrogen project in Victoria’s Latrobe Valley and a variety of Japanese and South Korean companies have entered into collaborations with Australian ventures around hydrogen, ammonia and e-methane.

Australia’s abundance of available geological storage space for carbon dioxide also makes it an attractive destination point for carbon emissions captured in Asian nations that lack storage capacity of their own. The Santos-led Moomba carbon capture and storage facility is expected to start storing emissions in 2025.

ANGEA’s take

Asia has long been able to rely on Australia as a trusted supplier of energy and it’s critical that relationship continues. In addressing its own energy challenges around gas supply, it’s extremely important that Australia takes into account the regional significance of its LNG to both energy security and progress on climate objectives in Asia.

Paul Everingham, CEO 

Photo of Canberra’s Parliament House by Michael on Unsplash

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