While Australia’s energy transition has gathered significant momentum in recent years as the country sets its sights on net zero carbon emissions, its oil and gas sector continues to support the nation’s energy system.
Stabile oil and gas supply in the next decades will be critical since the federal government will face a slew of issues that won’t be solvable in the short term – nor by 2050 for that matter.
Some of the challenges involve the large losses that would be incurred when abandoning traditional energy sources and expanding power infrastructure, the negative impact of foreign partners’ industries on the environment as well as the low productivity of some alternative Australian resources.
To remain a solid part of Australia’s energy mix at a time when reducing emissions becomes increasingly important, the successful and economic development of technologies such as carbon capture and artificial intelligence (AI) could well be game changers for producers.
Fossil fuels play a major role in society and are not only utilised for conversion to petroleum or feedstock sources for electricity grids. Oil, for instance, is used in an array of necessary products – including petrochemicals, plastics and pesticides – and to blacklist it altogether would necessitate finding suitable substitutes while establishing new supply chains. Furthermore, the market for traditional exports to emerging economies may offer too good an opportunity to ignore as consecutive Australian governments try to maintain budget surpluses and retire debt.
According to Mordor Intelligence, the market size of the oil and gas sector in Australia is estimated at 15,003 thousand barrels per day (bpd) in 2024 but is expected to drop to 12,112bpd by 2029. To help offset this, digitalisation – including AI, machine learning, data analytics, big data, robotics, virtual reality and automation – should create immense opportunities for Australia in the coming years.
“The Australian oil and gas industry is poised for a transformative period, driven by a growing demand for natural gas and significant infrastructural developments,” Mordor said.
“Despite the country’s strategic shift towards renewable energy sources, which poses challenges such as declining refining capacity and the closure of crude oil refineries, the market is expected to benefit from advancements in digital technologies.
“The midstream sector, encompassing the transportation and storage of crude oil and natural gas, is expected to experience notable expansion, supported by extensive pipeline infrastructure and Australia’s position as a leading exporter of liquefied natural gas.”
LNG, Mordor noted, was becoming increasingly central to Australia’s energy landscape, with rising production and consumption reflecting its role as a cleaner energy source.
The Commonwealth’s commitment to enhancing the east coast gas market supply chain, alongside significant investments in pipeline projects, underscore the strategic importance of natural gas infrastructure.
This is further bolstered by industrial demand from sectors such as refining and petrochemicals, which were crucial for economic growth.
Furthermore, the presence of active cashed-up major players like Shell, TotalEnergies, Chevron, ExxonMobil and BP means there is likely to be more strategic acquisitions and investments in pipeline projects, thus highlighting the dynamic nature of the industry as it navigates the transition towards a more sustainable energy future.
In the short term, according to International Energy Agency (IEA), the sector will remain “an important part of the energy landscape for years to come”.
The IEA has predicted that oil production – which will mainly be used for petrochemicals, aviation and shipping – will decline from around 100 to 77 million bpd (mbd). Moreover, oil demand is forecast to fall 75 per cent from current levels to about 24mbd in 2050.
“The IEA stresses that reaching net zero does not mean the end of oil and it continues to play a role, just a significantly reduced one,” global energy advisor FutureBridge observed. “So, even with climate goals, hydrocarbon infrastructure/ investment cannot be phased out overnight. “To this, oil and gas majors like BP predict oil demand may only fall 10 to 20 per cent by 2040.”
Meanwhile, according to the federal government’s September Resources and Energy Quarterly, demand is expected to increase by around 900,000bpd in 2024 and 2025 led by ex- OECD countries, with OECD demand declining slightly. Additionally, global oil requirements are forecast to reach 105.5mbpd by 2026.
“Throughout the outlook period, growth in oil consumption is forecast to be driven by a rise in petrochemical feedstock demand (liquefied petroleum gas, ethane and naphtha) as the demand for plastics and petrochemicals rises,” the report predicted.
“The rise in plastics and petrochemical demand reflects increasing industrial production and demand for lightweight materials. “Moderate gains in aviation fuel demand are expected.
Motor gasoline and diesel oil demand is expected to plateau as electric vehicle usage rises and petrol/diesel engines become more efficient.”
According to the federal government’s Future Gas Strategy Analytical Report, the role of gas is projected to change as the Australian 2050 net zero deadline looms.
However, even in net zero scenarios, the report claimed, Australia and the world would need gas at lower levels through to 2050 and beyond. “Australian gas will play an important role in an orderly
global and domestic energy transformation,” the paper noted. “However, to meet our legislated climate goals, we must find alternatives to gas and gas-related emissions must decline.
“Continued gas development and more flexible gas infrastructure is needed to increase the resilience of Australia’s energy system and keep costs down as we transition.”
As for carbon capture, use and storage (CCUS) – with technologies and applications including point source carbon dioxide, transport and underground geological storage as well as emerging CO2 removal methodologies involving direct air capture combined with geological storage – the report suggested it is now gaining enough momentum to significantly impact the longevity of the oil and gas sector.
Originally used to pressurise oil fields to boost extraction, there are now 41 operational CCUS projects and 351 in development across the globe, spanning a range of products, including ethanol, hydrogen, ammonia and cement.
