Resources and Energy Workshop

The Office of the Chief Economist held the Resources and Energy Workshop on 20 November 2015. Presentations on the day focused on the themes of Commodity outlooks and forecasting, China, Gas market and Energy.

Links to the presentations and video recordings can be found below.

Commodity outlooks and forecasting

An international relations framework for understanding resources and energy commodities

Stephen Wilson, Cape Otway Associates

Biography: Stephen Wilson is Director, Cape Otway Associates. His energy sector experience ranges from the light bulb to the network to the power plant to the coal mine and the uranium mine.

Stephen has over two decades of international experience working with corporations, financial institutions and development banks, utilities, regulators and governments in over 30 countries in Asia, Africa and Europe.

He has worked on energy efficiency programme design, greenhouse gas mitigation strategies, electricity generation and networks; regulation, tariffs and market design, the economics of yet-to-find gas, underground gas storage, master plans, bankability studies and strategic decision-making.

Previously General Manager – Market & Industry Analysis in Rio Tinto's Energy product Group, he was responsible for research and modelling to provide a global view of the energy sector and commodity-specific analysis on uranium, thermal coal and coking coal.

At Cape Otway Associates he provides commercial and economic advisory services, particularly for the natural resources, energy, infrastructure and utilities sectors. Among several clients he is currently advising the Department of Industry on commodity forecasting.

Abstract: In recent years, energy, minerals resources and metals comprised 80% of our goods exports, with 80% of those exports to countries in Asia. Iron ore, and metallurgical and thermal coal for customers in China, Japan and Korea have dominated the picture. LNG exports will increase substantially as new capacity comes on line. ASEAN countries will take an increasing share of our exports.

The economic and financial dimension is not the only consideration in trade. Environmental concerns feature strongly on the international agenda and security of supply remains as particularly important to energy importing nations.

This presentation discusses, in the light of recent and current experience, the five dimensions of international power as a framework for understanding resources and energy commodities. It describes how energy policy is deeply interwoven with the affairs of state, and how the challenging trade-offs between security, affordability and sustainability influence the outlook for resources.

Terms of trade: outlooks and implications

Alexandra Heath, Reserve Bank of Australia

Biography: Alexandra Heath is currently the at the Reserve Bank of Australia. She has also held senior management positions in the Economic Research, Domestic Markets and International Departments. She was seconded to the Bank for International Settlements in Basel Switzerland from 2005 to 2008 and had held a number of positions within Economic Group prior to this. She has worked on a variety of topic areas including macroeconomic forecasting, labour market dynamics, the impact of financial regulation on financial markets, global imbalances and the foreign exchange market.

Dr Heath holds a PhD and MSc in Economics from the London School of Economics and a BEc (Hons) from the University of Sydney.

Critical commodities

Roger Skirrow, Geoscience Australia

Biography: Dr Roger Skirrow is a principal research scientist at Geoscience Australia in Canberra, and currently leads the Mineral Potential of Australia Section in the Resources Division. Roger is a geologist who specialises in the study of mineral deposits and where they form. Current interests include: critical metals and minerals; iron oxide copper-gold deposits (Olympic Dam type), nickel-copper-PGE deposits; and uranium deposits. Roger has worked in government, universities, and mineral exploration companies where he gained experience in Australia, Canada and Argentina.  He has been at Geoscience Australia since 1995 and has led a wide range of multidisciplinary geoscientific projects. Roger holds an undergraduate degree from the University of Western Australia, a Master of Science from Carleton University in Ottawa, Canada, and a PhD in geology from the ANU.

Abstract: Critical metals and minerals are commodities of high importance for industrial economies, particularly in high-tech industries, that have a high risk of supply.  The most critical include the rare-earth elements, the platinum-group elements, tungsten, indium, niobium and cobalt.  Australia’s resources and geological potential for critical commodities provide an opportunity to supply global demand.

A focus on China

The Chinese economy in transition – a macroeconomic perspective

Adam McKissack, Treasury

Biography: Adam McKissack is currently Principal Adviser in the Foreign Investment and Trade Policy Division of Treasury, where he advises the Government on trade and investment policy as well as major cases before the Foreign Investment Review Board.  From 2010 until early 2015 he held the position of Senior Treasury Representative at the Australian Embassy in Beijing.  In this position he represented the interests of Treasury in China in areas such as economic reform, foreign investment, financial services and taxation.

Adam has held various other roles during his time in the Australian Treasury, including in the areas of economic forecasting, international finance, budget policy, structural policy and tax policy.  He has also worked in the Australian Taxation Office for a period to assist that organisation in developing its revenue analysis and forecasting capability and worked for a period in the Canadian public sector.

Abstract: The presentation considers economic reform in China in the context of its political and social model.  It considers the success of China’s economic model since reform and opening and the challenges with transforming that model in view of demographic change and the build-up of debt in China’s economy.  The presentation considers the Chinese Government’s reform program and challenges around adopting more market based approaches, drawing links to the implications for resources demand.

China: implications for resources and energy

Brian Fisher, BAEconomics

Biography: Dr Fisher is currently the Chairman and Managing Director of BAEconomics Pty Ltd. He was previously the Executive Director of the Australian Bureau of Agricultural and Resource Economics (ABARE) and the Professor of Agricultural Economics at the University of Sydney and the Dean of the Faculty of Agriculture at the University. Brian has been the government board member on a number of statutory corporations and an Associate Commissioner of the Productivity Commission and in 2005 the Chairman of the Prime Minister’s Exports and Infrastructure Taskforce. He holds a PhD in agricultural economics and a DScAgr from the University of Sydney. He specialises in commodity market analysis and provides advice on business strategy and project development to companies in the mining, agriculture and forestry sectors.

Abstract: Chinese commodity demand has slowed in the past year but between now and 2050 another 300 million people in China will be urbanized at the same time as an additional 400 million people in India move in cities. The underlying fundamentals for metals demand are therefore strong.

The gas market in transition

Modelling the east Australian gas market

David Whitelaw, Department of Industry, Innovation & Science

Biography: David Whitelaw has been with Economic and Analytical Services Division for over two years, where he is employed as a Gas Economist. He has a long history of working in the gas industry, commencing in the forecasting and modelling section of the Gas & Fuel Corporation of Victoria and later moving to GasNet Australia after the privatisation of the Corporation. At GasNet he held a number of positions including Regulatory Manager, in which role he managed two Access Arrangement submissions to the economic regulator. Before taking up his current position he has consulted to the Australian Energy Market Operator. He has a Ph.D in Physics from LaTrobe University.

Abstract: “The East Coast gas market is undergoing a significant transition as LNG exports commence from Queensland. This is placing considerable pressure on domestic prices and supply. Modelling of the market suggests that there are emerging supply constraints, but that there are also legitimate concerns about the growth of market concentration.”

Trends in Australian gas prices

Jim Snow, Oakley Greenwood

Biography: After graduation as a Chemical Engineer Jim spent 12 years in the Natural Gas Industry (AGL) holding several senior executive positions. Jim has worked on gas matters for over 35 years and is a recognised expert in wholesale gas contracting having written A$ billions of gas supply and transport agreements.

He has also held senior executive positions with Energy Developments Ltd running their Development and Construction Group, was CEO of Hunter Electricity, CEO of Consulting for Energetics Pty Ltd and was a founding Vice President in Australia of the Boston based consulting firm Charles River Associates which evolved to become Oakley Greenwood in Australia.

Jim has worked across the energy and water industry. This has included water and energy pricing and economic regulation, demand side management, greenhouse gas mitigation and emission trading, extensive and complex commercial modelling and price/volume forecasting work for electricity and gas; as well as building generation plants, gas pipelines and electricity grid systems, CNG and LNG facilities, managing energy retail operations and has consulted widely to the demand side, particularly energy intensive industry.

Jim has specific expertise in the development of embedded generation assets, energy storage and other demand side management activities for use in the deferral of network investments.

Jim has also undertaken large assignments internationally including spending more than two years restructuring the entire electricity industry of the Kingdom of Saudi Arabia and is currently advising on the restructure of the Malaysian electricity supply industry and associated incentives based regulation of the key monopoly assets of the country.

Abstract: This paper outlines the findings from the Gas Price Trends Review undertaken by Oakley Greenwood for the Australian Government Department of Industry, Innovation and Science and was presented at the Office of the Chief Economists Resources and Energy Workshop on 20th November 2015. The report itself is over 170 pages and this presentation is a short overview of the Industrial and Residential gas price trends over at least the last 10 years and narrative as to what drove those price trends and how future prices may be driven in the following 5 years.

The trends are presented by each jurisdiction (Sate and Territory) where data was available and covers large industrial customers (>1 PJ/year – wholesale gas prices), small Industrial customers (0.1 – 1.0 PJ/year) and Residential customers. For the Industrial sector the report highlights the impacts of LNG developments on wholesale gas prices in both the east and west coast gas markets and how this varies by distance from LNG demand centres, the potential impacts of the bi-lateral contracting in wholesale gas markets, the impacts of the carbon tax and many other associated issues. It also highlights the impact of demand and supply balances on wholesale gas prices and the need for new supply on the east coast, and impacts of non-conventional supply.

For the Residential market it demonstrates the major impact on prices of largely regulated distribution network costs and the direct correlation between energy usage (density) on those networks and pricing, which simply swamps the wholesale gas price escalation issues.

Economic and socioeconomic impacts of coal seam gas development

Tom Measham, CSIRO

Biography: Tom Measham is a senior research scientist and human geographer at CSIRO and leads the social science program of the Gas Industry Social and Environmental Research Alliance (GISERA), which is a collaborative vehicle co-founded by CSIRO and industry partners to undertake research that addresses the social and environmental impacts of Australia's natural gas industry. His research focuses on how regional communities are affected by the social and economic challenges which face them, and how they respond to new opportunities. He holds a PhD from Australian National University where he continues to serve as an Adjunct Associate Professor in the Fenner School of Environment and Society.  He also holds a Masters Degree in Environmental Science from James Cook University and a Bachelors Degree in social history from Sydney University.

Abstract: As global energy demand increases, the rapid expansion of the unconventional fossil fuel sector has triggered a need for social and economic research to understand how this sector affects host communities.  This presentation considers the social and economic effects experienced by Queensland regions during the construction phase of the coal seam gas industry, focusing particularly on the Surat basin.  It considers the extent to which the benefits of the construction phase were retained by local communities in the Surat basin through isolating residential (as opposed to commuting) labour effects. Specifically, the presentation demonstrates the increase in net residential employment in the Surat Basin after accounting for long distance commuting and transfer of labour from other sectors. In addition, the presentation provides evidence of community acceptance levels towards the industry and measures of community well-being. Community well-being compared favourably to the Queensland average.

Energy Change: from local to global

Ken Baldwin – Facilitator – Director – Energy Change Institute, ANU

Biography: Professor Ken Baldwin is the Director of the Energy Change Institute at the ANU, and Deputy Director of the Research School of Physics and Engineering. Since 2011 he was a member of the Project Steering Committee for the Australian Energy Technology Assessment (AETA) produced by the Bureau of Resources and Energy Economics (BREE).  In 2015 he was appointed as a member of the Socio-Economic Modelling Advisory Committee to the South Australian Nuclear Fuel Cycle Royal Commission.

Professor Baldwin is an inaugural ANU Public Policy Fellow, and winner of the 2004 Australian Government Eureka Prize for Promoting Understanding of Science, for his role in initiating and championing “Science meets Parliament”. In 2007, Professor Baldwin was awarded the W.H. Beattie Steele Medal, the highest honour of the Australian Optical Society.  In 2010 he was awarded the Barry Inglis Medal by the National Measurement Institute for excellence in precision measurement. Professor Baldwin is a Fellow of the American Physical Society, the Institute of Physics (UK), the Optical Society of America and the Australian Institute of Physics.

Abstract: NIL

Electricity demand analysis

Arif Syed, Department of Industry, Innovation & Science

Biography: For many years, Arif has managed economic and policy analysis programs at ABARES, Finance, and ATO.  For the last five years, he has been managing the energy and resources policy analyses, particularly the programs such as Energy Projections, Energy Efficiency and Productivity. 

He has held many prestigious international scholarships and fellowships such as the Fulbright Scholarship, and Post-Doctoral Research Fellow, University of Illinois, USA; and Italian Government Scholarship, Institute of Economic Development, Naples, Italy.  He was also awarded the Department ‘Secretary’s Merit Award’ in 2013, for playing a “leadership role” in the development of electricity generation technology costings.

Arif has mostly worked in executive positions with professionalism and probity, action orientation and resilience: either by virtue of managing projects, such as in Australia or the United States Department of Agriculture’s (USDA) project in the United States.  He currently presides over the EL2 Leadership Forum of the Department of Industry. 

He has had policy analysis, program evaluation, applied economic research and project management experience in various Commonwealth agencies including the Productivity Commission.  He has highly effectively completed many Whole-of-Government projects while working with many Commonwealth agencies and stakeholders.  Arif has published widely over the past several years.

Abstract: This report analyses sectoral electricity demand in Australia over the last many years. The results suggest that the slow economic growth, higher electricity and gas prices, greater energy efficiency of electrical appliances, and roof top solar PV have all contributed to the depletion of electricity demand over the study period, 2000-13.

2015 World Energy Outlook

Ian Cronshaw, International Energy Agency

Biography: Between 2005 and 2011, Ian Cronshaw was a Division Head at the International Energy Agency, with responsibility for analysing and reporting on developments in global gas, coal and power markets (including nuclear and renewables).

Since 2011, Ian has worked as a consultant with the World Energy Outlook team in Paris on coal, gas and power developments.  He has also worked with the Federal Government in various projects on those same markets.

Prior to his time at the IEA, Ian worked in the Australian Federal Government almost exclusively on energy policy subjects, ranging from reducing greenhouse gas emissions, energy efficiency, renewables targets, oil and gas security, and energy technology.

Abstract: This presentation will cover the World Energy Outlook (WEO) 2015, which is to be released on 10 November.  As usual, this year’s WEO provides in-depth analysis of global prospects for all fossil fuels, renewables, the power sector and energy efficiency, based on projections to 2040.   This year has a special focus on the impact of lower oil prices, analysis of climate pledges made in the run –up to COP21, and how the anticipated rapid growth in Indian energy demand will affect global energy markets.

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