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Canberra (Head Office)
60 Marcus Clarke St
Canberra ACT 2601
GPO Box 2201
Canberra ACT 2601
p: +61 2 6247 0960
e: appea@appea.com.au
w: www.appea.com.au
11 August 2023
Safeguard Mechanism Reform
Department of Climate Change, Energy, the Environment and Water
King Edward Terrace
Parkes
ACT 2601
RE: PRODUCTION VARIABLES UPDATE | EXPOSURE DRAFT CONSULTATION
The Australian Petroleum Production and Exploration Association (APPEA) welcomes the opportunity to provide comment and recommendations on the Production Variables Update Exposure Draft consultation.
APPEA emphasises the need to apply the Safeguard Mechanism reforms consistently across sectors, including ensuring the default production variables and emissions-intensity values are developed in line with the Department of Climate Change, Energy, the Environment and Water’s (DCCEEW) Framework for developing default production variables and emissions-intensity values. In particular, APPEA highlights the commitment from DCCEEW, as part of the Framework, to ensure default production variables and emissions-intensity values are Effective; Consistent; Practical; and Robust, and that the
Default Emissions Intensity Calculation Method is used, where possible, to calculate default emissions- intensity values for each prescribed production variable.
Key recommendations:
1) The proposed default emissions intensity value of 0.928 should be applied to reservoir CO2 from existing gas fields. APPEA notes that the application of the Default Emissions Intensity Calculation
Method, fully applied in accordance with the requirements outlined in the Framework for developing default production variables and emissions-intensity values, would produce a default emissions intensity value of 1.0. However, APPEA accepts the proposed default emissions intensity value of 0.928 for reservoir CO2 from existing gas fields, and the additional emissions reduction commitment from the sector that this value represents, as a compromise outcome following engagement with DCCEEW.
2) The default emissions intensity value for reservoir CO2 from new gas fields serving the domestic market should be determined based on the consistent and transparent methodology for establishing international best practice for all other production variables – currently under consultation – and not based on the default emissions intensity value for reservoir CO2 from new gas fields serving liquified natural gas production. The default emissions intensity for reservoir CO2 from new gas fields serving liquified natural gas (LNG) production of net zero was established without adequate or industry-wide consultation. It is essential that default factors for new gas fields serving the domestic market are determined through an evidence-based, transparent and consistent assessment of international best practice – as will be the case for all other production variables for new facilities. The requirement for
net zero should therefore be considered as a policy requirement and not international best practice and should not be used as a precedent for reservoir CO2 from new gas fields serving the domestic market.
Further, the treatment of natural gas and the separation of reservoir CO2 for LNG is technically and economically distinct from the treatment of natural gas and the separation of reservoir CO2 for the supply of gas into a domestic natural gas pipeline network. The CO2 specifications for domestic gas pipelines also differ compared to the CO2 specifications for LNG production. To emphasise this point, there is no CCS project anywhere in the world associated with natural gas produced solely for a domestic market, other than where the CO2 is used for enhanced oil recovery.1 In addition, domestic-focused and onshore gas production in Australia tends to be low-CO2 where CCS is not applicable and few, if any, abatement technologies are available.
Therefore, the application of a net zero default emissions intensity on reservoir CO2 from new gas fields serving the domestic market in no way represents international best practice for domestic gas production. Counter-intuitively, it also risks punitively impacting low-CO2 fields and ultimately would add to the cost of domestic gas supply for Australian households and businesses while exacerbating the risk of forecast domestic supply shortfalls.
APPEA and its members welcome the opportunity engage further on the development of production variables and default emissions intensities under the Safeguard Mechanism reforms.
Yours sincerely,
Samantha McCulloch
Chief Executive
1 International Energy Agency CCUS Projects Explorer (accessed 2 August 2023)
