Sustainably Growing Energy and Mining in

CONSULTATION PAPER Sustainably Growing Energy and Mining in South Australia

Department for Energy and Mining Level 4, 11 Waymouth Street, GPO Box 320, Adelaide SA 5001 www.energymining.sa.gov.au

Disclaimer The contents of this paper are for general information only and are not intended as professional advice, and the Department for Energy and Mining (and the Government of South Australia) makes no representation, express or implied, as to the accuracy, reliability or completeness of the information contained in this paper or as to the suitability of the information for any particular purpose. Use of or reliance upon the information contained in this paper is at the sole risk of the user in all things and the Department for Energy and Mining (and the Government of South Australia) disclaim any responsibility for that use or reliance and any liability to the user.

2 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity Inviting your ideas

The Marshall Liberal government has initiated Growth State – Our Plan for Prosperity recognising we need to do things differently to create an environment that is conducive to economic growth and a more sustainable, prosperous future for South Australians. Carefully designed to leverage South Australia’s competitive advantages, Growth State is a work plan to promote industry growth by responding to the needs of business and industries. At its heart, Growth State articulates what government is doing, informed by what industry needs. Growth State is a coordinated government commitment to real, concrete actions and deliverables. Removing barriers, clearing paths, facilitating, and aggregating, Growth State will be instrumental in focusing government resources and energies. Working in consultation with industry, together we will reaffirm the positive aspects of living and working in South Australia to enhance the prospect of investing here. The energy and mining sector is one sector where substantial prospects exist to responsibly develop opportunities, grow productivity and grow our competitiveness. This Consultation Paper outlines current Energy and Mining programs and potential further action to support Growth State in this critical sector of the economy. Existing industry initiatives such as the Copper Strategy, Magnetite Strategy, South Australian Hydrogen Action Plan and the Roundtable for Oil and Gas will be complemented by the Clean Energy Transition and new initiatives such as the Accelerated Discovery Initiative, Battery and Emerging Minerals Strategy and the Electric Vehicle Strategy foreshadowed in the 2019-2020 State Budget. This Consultation Paper defines the scope of the energy and mining sector and suggests ambitious targets to support the objectives of Growth State. It also seeks feedback to define what business needs so further actions can be identified that will encourage confidence and address barriers to investment. The final version of the Strategy will inform government of the energy and mining sector’s priority needs in delivering stronger growth and will highlight relevant government commitments. Government will respond to sector strategies through the Growth State work plan. We need energy and mining businesses and industry input for this Energy and Mining Strategy and your feedback on the information provided in this Consultation Paper. You can provide feedback through the Department for Energy and Mining website www.energymining.sa.gov.au/growthstrategy or email [email protected] by 1 November 2019.

CONSULTATION PAPER 3 Sustainably Growing Energy and Mining in South Australia Minister’s foreword

Providing affordable energy and economic prosperity through responsible resource development As South Australians, we have a shared responsibility to build a stronger, better future and fulfil our State’s true potential. For South Australia to succeed in creating an environment that is conducive to sustainable growth, we need to embrace a different approach. The Government of South Australia is leading this necessary change by developing Growth State. At its heart, Growth State articulates what government is doing, informed by what industry needs. To grow our economy, we need a plan to improve our productivity and competitiveness. To grow our population, we need to project a confidence in ourselves that not only encourages young people see their future here but also attracts other people to want to relocate to our State. My vision is that all South Australians benefit from the prosperity generated by responsible growth of our energy and mining sectors. South Australia has a central role in providing reliable and affordable energy to the nation and creating prosperity through the production and export of our resources wealth. Management of South Australia’s energy and mining assets needs to maximise the community benefit from their responsible and sustainable use. The community owns our energy and mineral rights and there is an obligation to develop them for the benefit of the South Australian public. A key principle of the emerging Energy and Mining Strategy is the environmentally and socially sustainable development of our resources. This Strategy acknowledges the role renewable energy sources, oil and gas have in powering our industries and homes and sets out practical steps to build support for its continued development. Minister for Energy and Mining Daniel van Holst Pellekaan MP

4 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity Chief Executive’s foreword

Confidently and sustainably developing pillar industries South Australia has long been a supplier of energy and mining commodities to the world through a well-regulated framework of laws and investment policies. Across the decades, the South Australian Government has adopted practical policies to support environmentally sustainable energy and mining industries. South Australians rely on an affordable locally produced source of reliable energy whether they are working in industries that use gas or electricity in their operations or households heating their homes and cooking their meals. The energy and mining industries support tens of thousands of jobs and create economic opportunities for businesses in South Australia, across the nation and internationally through export pathways that connect us with the east coast and the world. To meet our demand for energy, the search for oil and gas continues not only in our onshore basins but also in offshore frontiers. Sustained demand from urbanising markets in our region for key commodities such as copper, uranium, iron ore, gold, mineral sands and lead support the operations of our major miners and smelters. Fundamental for support of continued exploration and production is public trust in the laws that govern the industry. The South Australian government strives for continuous improvement of its regulations of the mining, extractives and energy industries. The six key principles of certainty, openness, transparency, flexibility, practicality and efficiency are the foundations on which we have built our regulatory frameworks. As part of the discussion about a comprehensive strategy, the Department for Energy and Mining is also seeking feedback on how we can build on those principles to better guide further growth with a focus on: infrastructure; trade and investment; skills and innovation; and land, water and the environment. Chief Executive, Department for Energy and Mining Dr Paul Heithersay PSM

CONSULTATION PAPER 5 Sustainably Growing Energy and Mining in South Australia Contents

Inviting your ideas 3 Minister’s foreword 4 Chief Executive’s foreword 5 Focus areas for an Energy and Mining Strategy 7 Overview of South Australia’s energy and mining sector 8 Growth targets 12 Energy and mining exports 13 Capital investment by energy and mining 15 Competitive energy 18 Key growth opportunities 23 Key challenges 24 Government role and focus 25 Energy and mining priorities 27 Trade 27 Investment 30 Skills and innovation 31 Infrastructure 32 Land, water and the environment 34 Case studies 35 Carrapateena: From discovery to development of a modern copper-gold project 35 Hornsdale: Harnessing energy storage to improve system security and affordability 36 Appendix 1 38 Historical events in developing South Australia’s energy and mining industry 38 Next steps 39 Contact 39

6 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity Focus areas for an Energy and Mining Strategy

Growth State – Our Plan for Prosperity •• Capturing new opportunities from invites the key sectors of South Australia’s our clean energy transition – adding economy to set ambitious goals for value to our existing advantages growth to sharpen the opportunities for from in-demand resource assets and investment and the policy trade-offs for the advanced state of our energy government consideration. transition. The Energy and Mining Strategy will The four overarching targets for industry outline the potential for growth from and government in this Consultation this sector and inform government on Paper collectively support the sustainable industry’s needs in delivering stronger 3 per cent economic growth objective sustained economic growth. for the State. There is an inter-relation between energy As the world advances toward a low- and mining, between our gas production carbon future, South Australia has an and energy generation, between the competitiveness of energy prices and the increasing role to play in providing profitability of energy-intense mineral mineral commodities that support processing, between our renewable energy efficient cities and providing energy capacity and our export potential. transitional fuel sources such as gas and hydrogen to support the shift to Strategic focus areas that both reflect the renewable energy solutions. relationship between energy and mining and leverage our advantages to achieve The Strategy also acknowledges the stronger economic growth are: importance of the extractives sector •• More competitive and sustainable to support construction, roads and energy – creating a more competitive infrastructure as well as industrial and productive energy sector to processes. better power all South Australian Our purpose is to work with explorers, industrial growth. producers, providers, industrial and •• Responsibly unlocking our resources – residential consumers, landowners and facilitating discovery, investment and regional communities to implement a exports of our energy and resources comprehensive and sustainable Energy endowment to support sustained and Mining Strategy for the benefit of all economic growth. South Australians.

CONSULTATION PAPER 7 Sustainably Growing Energy and Mining in South Australia Overview of South Australia’s energy and mining sector

South Australia’s energy and mining •• processing activities – including sector is a significant contributor to the copper refining, graphite benefication, State’s economy, comprising $8.7 billion processing of extractive mineral or about 8 per cent of the State’s annual materials, basic steel production and Gross State Product (GSP) in 20181 lead smelter output and about 44 per cent of the State’s international goods exports, valued •• electricity and gas through the value about $5.3 billion. Energy and mining chain – from production, generation, directly employs a diverse workforce transmission and distribution to retail of more than 41,000 South Australians, services and storage options and plays a pivotal role in the economic •• energy transition opportunities – development of regional South Australia including renewable energy and including through its support for new industries and value chain Aboriginal businesses and employment. opportunities such as hydrogen, Figure 1 highlights the regional extent electric and fuel cell vehicles, and of key current and proposed energy and other energy storage technologies mining projects. and innovation Table 1 gives the Economic contribution •• direct energy and mining construction of South Australia’s energy and minerals, activities 2018. •• equipment, technology and services Appendix 1 shows the development for energy and mining, including: of the energy and mining sector since –– mining equipment, technology settlement. and services (METS) and Energy and mining for the purposes of –– expanded energy demand the Strategy includes: management options and “smart” •• minerals and petroleum resources energy technologies. exploration and production activities

1 All years in this strategy refer to financial years (e.g. 2018 for 2017-18) unless otherwise stated.

8 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity

NORTHERN TERRITORY Birdsville ")

") Pukatja ") ") STRZELECKI D

Amata N Pipalyatjara TRACK

A

L

MUSGRAVE PROVINCE S ") EROMANGA BASIN

N ") Kaltjiti (Fregon) Indulkana (overlies ARCKARINGA and PEDIRKA BASINS) E

E

Marla U ") ") Mintabie Q Oodnadatta ")

Arckaringa COOPER

*

Moombað # BASIN

A

LI

A

TR S ")

U ^_ A

CAIRN HILL

N Ç ") Snaefell PECULIAR KNOB Ç ")

TER Oak Valley Tibooburra CHALLENGER Ç PROMINENT HILL ") Marree

ES Ç

H W Hawks Nest

FOUR MILE T

S Ç U GAWLER CRATON OLYMPIC DAM Ç E O

L BEVERLEY S ÇD !( LEIGH CREEK Ç Leigh A ")

W Ç Flinders Ç Creek W JACINTH- Atacama E AMBROSIA TARCOOLA BELTANA CURNAMONA N Ç Sonoran PROVINCE Typhoon Fremantle ") Doctor Tunkillia Woomera Ç CARRAPATEENA Gould's North Portia Tripitaka Mount Dam ÇPORTIA Gunson HONEYMOON KALKAROO ÇÇ Junction Ceduna Dam ") Crocker WHITE DAM ") Thevenard !( Well Ç Menninnie (! ADELAIDE Mutooroo Dam ¸ ") RIFT COMPLEX Paris (! Wudinna !( Maldorky Muster Dam

Weednanna !( * Poochera !( # ¸ !( ¸ MIDDLEBACK RANGEÇ D(") ð ¸ (! Razorback

D ")!(

CENTRAL EYRE Ç ^ ¸ ¸ * ¸ # Port ^ ¸ IRON PROJECT CAMPOONA Samphire ¸ Pirie¸ ¸ Ç ¸ Bungalow ¸

WILGERUPÇ ¸ !( Ç ¸

!( * Oakdale Ç !( # ¸ ¸ !( SIVIOUR !( BIGHT BASIN Fusion ¸ ")

Renmark ")

KOOKABURRA GULLY Ç !( *

# ¸

¸ Ç Mildura *

# HILLSIDE

!(

") * D # *

¸ # * #

* G # ¸ * Ç # Ç MINDARIE

ADELAIDE

ULEY ") Bird-in-Hand

¸

* * # # Ç !( Ç KANMANTOO(! A ANGAS I ¸ Kingscote R ") O

T

C

I

V

0 100 200 300 400 km

Projection: Lambert Conformal Conic Horsham ¸ ")

Robe ")

* Katnook #

Mineral province ð ¸ ¸ * Minerals # ¸ Key petroleum basins Ç Operating mine ") Renewable Energy Zone (REZ) Ç Approved mine or mine Mount Gambier in care and maintenance

Energy generation ") * # Developing project Gas/diesel power station Portland ¸ D Mineral processing Wind OTWAY BASIN !( Solar Quarry/extractives lease ^_ Hybrid Oil and gas Storage ð Petroleum processing Remote Areas Energy Supplies (RAES) Gas pipeline community 205202-006 Liquids pipeline Transmission line Ethane pipeline Proposed NSW-SA interconnector (330 kV) Gas field Energy projects Energy projects Oil field - proposed - under construction Offshore petroleum ¸ ¸ Wind Wind exploration licence (EPP) !( Solar !( Solar South Australia ^ Hybrid Storage Other infrastructure Storage ") Town Biomass Flinders Ports ENERGY AND G Hydrogen Strzelecki Track MINING PROJECTS

Figure 1. South Australian energy and mining projects as at 30 June 2019.

CONSULTATION PAPER 9 Sustainably Growing Energy and Mining in South Australia

Energy and mining has been identified as one of nine ? agreed potential growth sectors contributing to South Australia’s growth agenda – which is to achieve a Is energy and sustainable 3 per cent annual South Australian economic mining as a growth over the next five to eight years – or about twice sector identified the average growth rate for the State in the 10 years to 2018. Mining2 expanded in that period by an average appropriately? 3.3 per cent a year. Energy and mining can contribute to even stronger economic growth by: •• delivering affordable, reliable and secure energy supplies in a transitioning national energy market, and •• responsibly unlocking the value and opportunities offered by South Australia’s mineral and energy resources. South Australia’s resources advantages are considerable. South Australia hosts 65 per cent of Australia’s economically demonstrated copper resource with potential for further discoveries and expansion of existing mines such as Olympic Dam. Extensive exploration has defined a resource base of 15.9 billion tonnes of magnetite iron ore across three regions of the State, representing about 44 per cent of Australia’s economically demonstrated resource. An extensive extractive resources industry supplies critical inputs to the State’s infrastructure and development sectors. South Australia also has domestic and international granite, slate and limestone trade opportunities. South Australia’s oil and gas sector is experiencing an increase in exploration and production activities in both the Cooper and Otway basins as well as emerging opportunities for opening new onshore and offshore frontiers. The Cooper-Eromanga Basin has produced more than 5 trillion cubic feet (tcf) of gas and more than 340 million barrels of petroleum liquids since the field was opened in 1969 with early indications the Cooper Basin could produce considerably more oil and a further 200 tcf of gas supply. South Australia has a natural confluence of wind and solar resources in the Upper , and low-cost, reliable renewable energy in regional areas with

2 Sector as defined by ABS State Accounts.

10 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity

Table 1. Economic contribution of South Australia’s energy and mining, 2017-18. Gross value of Contribution to Employment production Gross State Product FTE jobs $b $b Resources Oil and gas extraction 1.20 .86 2,575 Iron and non ferrous mining 4.06 2.63 8,578 Non metal mining .38 .27 1,718 Exploration .16 .12 249 Energy Electricity generation 1.47 .36 1,965 Electricity distribution and transmission 1.67 1.35 2,837 Gas supply .38 .13 722 Manufacturing 3.33 .63 6,276 (Non metallic minerals and basic metals) Mining equipment, technology and services 2.90 1.43 9,104 Capital formation 3.54 .9 7,525 Total energy and mining 8.75 41,551 South Australia 107.4 817,222 Total as a per cent of South Australia 8.2% 5.1% Source: BDO EconSearch 2019

low-population densities. These natural risk for its own export commodities advantages have supported South but also create opportunities to export Australia to become an international commodities such as hydrogen to assist leader in large-scale generation and on other governments in achieving their the cutting edge of storage of renewable international obligations. energy with a significant number of projects underway throughout the State. South Australia is also committed to maximising the economic and Delivering affordable, reliable and job opportunities associated with secure energy supplies in a transitioning renewable energy and energy storage national energy market supports a global projects across the value-chain in transition toward a low-carbon future technologies that harness wind, solar, that mitigates the impacts of climate bioenergy, pumped hydro and thermal change, and increased competitiveness storage. Innovative industries, that are of all our energy-using sectors. Action both connected to these technology on both the supply and demand side are opportunities and have access to new required to improve energy productivity research, will not just unlock the value and reduce input costs. of South Australia’s advantage in energy The decarbonisation of the State’s and mining, but also contribute to electricity grid will make South Australia efficiencies that underpin much stronger not only a jurisdiction with low-carbon and sustained economic growth.

CONSULTATION PAPER 11 Sustainably Growing Energy and Mining in South Australia Growth targets

South Australia’s energy and mining The proposed four energy and mining sectors are a target area for expansion targets comprise exports of both under South Australia’s growth agenda. To energy and minerals, private exploration achieve the agenda’s ambitious target of expenditure, investment attractiveness sustaining annual growth in Gross State and competitive energy supplies. Product (GSP) at 3 per cent in the decades ahead, energy and mining will need to These targets are: continue and accelerate the significant •• International exports are to increase contribution to economic activity of the from $5.3 billion in financial year 2018 past decade. Such a step up in pace will to $8 billion in 2025 and to $13 billion require higher productivity, expediting by 2030. the development of the State’s project pipeline and accessing new markets for •• Private exploration expenditure will existing and emerging South Australian increase from $158 million a year exports. in 2018 to a sustainable average of $300 million a year by 2025. Energy and mining as defined in this sector Strategy comprises a substantial •• New capital investment in energy 8 per cent share of South Australian and mining to total $18 billion across economic output. Despite its sustained seven years to 2025. performance as an economic contributor, •• Energy supplies in South Australia are the energy and mining sector has an to be nationally competitive before even greater potential for growth. 2025 and internationally competitive Forecasts for growth in global demand by 2030. for key commodities supplied by South Australia and a pipeline of renewable energy and utility infrastructure projects underpin its potential for a larger contribution to future economic output. ? Are these four targets achievable and sufficiently bold to support our Growth State ambitions? Can these targets serve to identify industry’s barriers and opportunities for stronger economic growth?

12 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity

Noting international exports from the sector averaged 5.1 per cent a year “South Australia’s future prosperity growth in nominal terms in the 10 years will be built by accelerating the to 2018, an average 8.1 per cent annual growth of sectors that have strong growth proposed to 2030 is necessary growth prospects globally and in to achieve the $13 billion target. While which the State has a comparative seemingly ambitious, this target rate advantage. This requires a concerted is of similar magnitude to Australia’s increase in private sector investment unprecedented expansion of minerals and trade, and requires concentrated and energy resources export since 2000. effort from the Government to remove barriers to growth.” Increased export sales, investment to – Stephen Joyce enable growth and more competitive energy delivery are all well-recognised measures of business growth and target lower costs and productivity to drive Further detail on the proposed targets: sustained economic development beyond the energy and mining sectors. Energy and mining exports Together they support jobs and increased business activity in transport International exports are to increase from and logistics, minerals processing, mining $5.3 billion in 2018 to $8 billion in 2025 and equipment, technology and services $13 billion by 2030. and training and skills development well International exports of resources outside the mine gate. from the energy and mining sectors of Addressing constraints in the energy $5.3 billion comprised about 44 per cent and mining sectors to achieve these of South Australia’s total exported goods four targets will engender an efficient in 2018. South Australia hosts energy pathway toward enhanced economic and mined resources that are required to growth that aligns with South Australia’s meet forecast global demand, especially growth agenda. Near unprecedented in identified growth sectors such as performance will be required in a renewable technologies, urbanisation, contemporary context and, as a trade- energy efficient minerals processing and exposed sector, energy and mining low carbon transport alternatives such remain sensitive to international electric and fuel cell vehicles. headwinds such as a commodity The proposed export targets have price cycles, a retreat towards trade been developed through a bottom-up protectionism and constrained capital energy and mining sector-by-sector and markets. major project approach. Achieving the As part of a broader effort to monitor proposed export targets illustrated in and assess performance, these target Figure 2 does not require the full and measures can be used to assess concurrent implementation of all current contribution to South Australia’s growth South Australian energy, copper and agenda and growth in gross state magnetite mining and steel industry product more specifically. strategies or visions.

CONSULTATION PAPER 13 Sustainably Growing Energy and Mining in South Australia

AUD $billions (nominal) 14 $13bn

12 Historical exports and trend Export targets 10 Historical (10 year) trend growth rate

$8bn 8

6

4

2

0 2 0 1 4-15 2 0 1 5-16 2 0 1 6-17 2 0 1 7-18 2 0 1 8-19 2 0 19-20 2 0 0-21 2 0 1-22 2 0 2-23 2 0 3-24 2 0 4-25 2 0 5-26 2 0 6-27 2 0 7-28 2 0 8-29 2 0 29-30 2 0 7-08 2 0 8-09 2 0 09-10 2 0 1 0-11 2 0 1 1-12 2 0 1 2-13 2 0 1 3-14

Years 205221_003

Figure 2. South Australian energy and minerals exports (nominal $Ab). Source: ABS, DEM estimates.

It is however proposed as an ambitious export industries and jobs in areas target, requiring the concurrent and such as hydrogen, electric and fuel cell unprecedented development of a vehicles, the battery value chain and significant share of already approved smart management of grids with high or equivalent newly proposed mineral penetration of renewables and flexible projects, oil and gas reserves and demand (such as electric vehicles). implementing existing project plans for transformed and expanded minerals While the proposed targets are yet to processing activities, particularly in quantify these export opportunities, the Upper Spencer Gulf and Far North CSIRO estimates that based on growing regions. demand from countries such as Japan, South Korean and China, a hydrogen Our regional customers already regard export industry could be worth South Australia as a reliable supplier of $1.7 billion and provide 2,800 jobs in oil, gas and gas liquids with the Cooper Australia by 2030. Basin exporting oil and LPG through the Port Bonython processing facility since 1984. The worldwide energy transition is also creating significant opportunities for South Australia to develop new

14 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity

This more than doubling of current H2U is developing a 50 tonne a day export values in nominal terms to 2030 renewable ammonia facility near equates to an average annual growth Port Lincoln. The State government rate of real export values of 5.4 per cent a has committed a $4.7 million grant year to 2030. and a $7.5 million loan from the Renewable Technology Fund to Capital investment by energy support this project. The facility would be 100 per cent powered and mining by South Australian wind and Private exploration expenditure will increase solar energy, producing renewable from $158 million a year in 2018 to a ammonia to supply the mining sustainable average of $300 million a year sector’s demand for beneficiation and by 2025. explosives as well as for refrigeration and agricultural purposes. There is New capital investment in the energy and potential for international shipping mineral resources sectors to total $18 billion of renewable ammonia from H2U’s across seven years to 2025. Port Lincoln production facility. Energy and mining are capital-intensive industries. South Australia has already attracted substantial investment in South Australia has developed a mineral resources production and Hydrogen Action Plan and is actively processing during the past decade supporting the national strategy for including recent upgrades to smelting developing this industry. Through capacity at both Roxby Downs and Port the Renewable Technology Fund, the Pirie. South Australian government has provided grants and concessional Proposed expansions of production loans to encourage projects seeking at Olympic Dam and the Whyalla to demonstrate the feasibility of local Steelworks augur well for continued hydrogen production and supply capital investment. BHP has already capacity that can potentially be scaled- moved production into the Southern up as new markets emerge both Mine Area and has completed an internationally and within Australia. extensive Smelter Maintenance Campaign at its Olympic Dam project. With established infrastructure, and A major project declared development transport and handling practices, proposal seeks to increase annual copper ammonia is one of the most prospective production to 350,000 tonnes, which chemical carriers of hydrogen for export will require further capital investment. purposes. OZ Minerals’ $900 million Carrapateena Opportunities for enhanced interstate project is under construction with trade in electricity, oil and gas and other production expected before the end of energy and minerals resources are also 2019 and a proposed expansion of up to not included in these export targets. $1.3 billion already under consideration.

CONSULTATION PAPER 15 Sustainably Growing Energy and Mining in South Australia

South Australia MINERAL PROCESSING Mineral Industry 3 Major Mineral Project Pipeline Processors 3 Nyrstar, BHP & GFG Alliance

MINES & DEVELOPING PROJECTS $4.6 Billion Production $150.7 Million Royalties 26 MRD Production returns 2018 MRD Royalties 2017-18

MINERAL PROJECTS

$955 Million 30 Capital Expenditure Company releases 2017-18

MINERAL EXPLORATION $76.1 Million Exploration with Expenditure ABS Cat. 8412.0 180 700+ 2018 companies mineral exploration licences

08/04/2019-205102_001 www.energymining.sa.gov.au/minerals/invest

GFG Alliance has already signed contracts prices, such as the Honeymoon uranium for capital investment projects worth an mine. initial $600 million to put the on a more commercially Graphite projects Siviour, Campoona sustainable footing by boosting steel Shaft and Kookaburra Gully and production to 1.8 million tonnes a year metalliferous projects such as Hillside and has acquired iron ore resources on copper on , Grants and the Eyre Peninsula to add to its existing Maldorky iron ore and Kalkaroo and mineral assets in the Middleback Ranges. Mutooroo copper in the Mid-North, and the Central Eyre Iron Project on the Iluka Resources has initiated an western Eyre Peninsula are frontrunners expansion into the Ambrosia deposit in an extensive pipeline of resource of its Jacinth-Ambrosia heavy mineral projects advancing through the sands project in the Eucla Basin and has evaluation, development assessment and identified other potential near mine permitting process. deposits that provide a pipeline of future resources that could be shipped through Recent investment in exploration in the Port of Thevenard. the Otway Basin also augurs well for the reinvigoration of the former gas South Australia also has several resource production sector in the Limestone projects in care and maintenance that Coast region and its support for local can potentially return to production in manufacturers. The discovery of gas with response to more favourable commodity Haselgrove 3 has rekindled interest in this

16 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity onshore basin with further exploration expenditure exceeded this value in more wells at Haselgrove 4, Dombey 1 and than half of the past 10 years (Figure 4). Nangwarry 1 as well as proposed A sustainable target has been set in investment in a new gas processing plant the context of the acknowledged supported by a Commonwealth grant. variability in private exploration due As observed during the recent Australian to cyclical market conditions. About mining boom (Figure 3), investment $11 billion of the ambitious $18 billion in mining projects is a key growth capital investment target aligns with driver and direct source of short- the proposed energy and minerals term economic activity as plant and export targets. The remaining $7 billion equipment is installed and transport in capital investment out to 2025 will infrastructure and other construction support more competitive, reliable and activities are undertaken. Significant secure energy, and new industries and export growth of mineral products only job opportunities associated with a occurs after significant capital investment successful energy transition. in project development and production. To further encourage exploration and Effective investment in exploration across foster collaboration through information a long timeframe is pivotal to resource sharing and testing of new technologies, discovery. A $300 million exploration the South Australian government has target by 2025 may not seem ambitious launched a $10 million Accelerated noting that South Australian exploration Discovery Initiative (ADI).

3 Production phase

2 Investment phase Index A$ billions 1 Price phase (committed projects) 160 300

140 250 120 Production 200 100 Prices 80 150

60 100

40

50 20 Investment (rhs) 0 0 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 Years 205221_006

Figure 3. Three phases of the Australian mining boom. Source: Resources and Energy Quarterly, March 2018.

CONSULTATION PAPER 17 Sustainably Growing Energy and Mining in South Australia

$million 700

600 South Australia Minerals Expenditure South Australia Petroleum Expenditure 500

400

TARGET $300 million 300

200

100

0 2000-01 2001 - 02 2002 - 03 2003 - 04 2004 - 05 2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 2010 - 11 2011 - 12 2012 - 13 2013 - 14 2014 - 15 2015 - 16 2016 - 17 2017 - 18 2018 - 19 2019 - 20 2020 - 21 2021 - 22 2022 - 23 2023 - 24 2024 - 25

Years 205221_007

Figure 4. South Australian private exploration expenditure ($m nominal). Source: ABS.

The ADI takes a more collaborative •• proof-of-concept proposals that are approach to minerals exploration not restricted to a technical discipline funding to ensure the knowledge, know- to encourage innovation in the sector how and broader economic benefits •• logistical support associated with of any supported drilling program testing exploration targets in remote are shared with other explorers and greenfields and new frontier regions industries. The initiative also seeks to •• identification and testing to EPA- reduce the substantial financial risk prescribed guidelines of new that resource companies take on when groundwater resources exploring green-field targets and new •• collaborative technology and/or frontiers. machine learning projects that will The ADI’s objectives include: benefit exploration. •• funding for single deep holes and/ Competitive energy or multiple hole drilling programs in frontier terrains or that test new Energy supplies in South Australia are to minerals exploration concepts in be nationally competitive before 2025 and other areas internationally competitive by 2030. •• geophysical programs that focus on the application of innovative technology and concepts

18 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity

Energy is essential to South Australian to fall by an average 3.3 per cent a year economic activity and is a vital input for for the next two years as new generation many industries. In some manufacturing supply enters the market. sectors, energy costs can range from 5-10 per cent of sales revenue. For most Futures prices for wholesale electricity sectors of the South Australian economy, in South Australia are significantly lower energy costs represent less than 2 per than the average $119 a MWh volume cent of sales. weighted wholesale prices of over the last three financial years (Figure 7). However, South Australian businesses have experienced unprecedented In addition to competitive energy increases in electricity and wholesale gas supplies, more productive industry prices in recent years, and this is having a choices and more productive energy dramatic impact on their profitability and services for industry can contribute ability to compete. to South Australia’s growth agenda objectives. Improved energy productivity •• Real effective prices for commercial will help industry adjust to the energy and industrial electricity customers transition, boost competitiveness and increased by more than 50 per cent economic growth – and reduce South in the past 10 years to an average Australia’s greenhouse gas emissions. 15.7 c/kWh in 2018 across the national electricity market3. The National Energy Productivity Program (NEPP) is targeting improving •• Gas contract prices have increased Australia’s energy productivity by 40 per from historical averages of $3-4 a cent between 2015 and 2030 (Figure 8). gigajoule (GJ) to about $8-11 a GJ with South Australia could develop a state- the ACCC indicator LNG netback price based target to inform energy market currently averaging $8 a GJ for 2019. reform and energy efficiency measures. South Australian electricity prices have also been at the upper end both nationally and internationally, as depicted in Figures 5 and 6 showing indicative electricity prices. State and national policy reform and industry responses may already be having an impact on energy prices. The Australian Energy Market Commission (AEMC)4, the expert energy adviser to Australian governments, has found residential prices in South Australia fell by 1.9 per cent in 2018, and expects prices

3 Australian Competition and Consumer Commission (ACCC). 4 AEMC, 2018 Residential Electricity Price Trends, Final report, 21 December 2018.

CONSULTATION PAPER 19 Sustainably Growing Energy and Mining in South Australia

c/kWh 50

45 44.9 44.0 42.8 40 40.0

34.5 35

30 27.8 26.5 24.7 25 26.4

20 20.6 19.1 19.7 15

10 Weighted average 5

0 Victoria NSW South Australia South east Queensland 205221_001 Figure 5. Indicative SME electricity prices 2018. Real $2017 excl. GST. Source: ACCC 2018.

Denmark 50.2

Germany 49.3 South Australia 47.8 Spain 39.0

NSW 38.6 Portugal 37.3

Ireland 37.2 Victoria 36.0 Queensland 35.1

Czech Republic 33.1 Great Britian 33.1

Western Australia 33.1 Belgium 32.6 Italy 31.6 Cyprus 30.9

France 30.7

Austria 30.5 Netherlands 30.0 Luxembourg 29.3 Greece 28.4

Sweden 27.1

Tasmania 26.0 Latvia 25.6 Slovenia 24.8 International Energy Poland 24.8 Network ACT 23.8 Environmental/Taxes Slovakia 23.5 VAT/GST Croatia 23.5

Estonia 23.4 Australian states Energy Finland 22.1 Network Romania 21.2 Environmental/Taxes Malta 19.5 VAT/GST Hungary 19.3 Lithuania 18.1

Bulgaria 17.4 Average EU 34.1

Average AUS 37.4 (National Energy Market) 0 10 20 30 40 50

cents/kWh (AUD) 205221_002 Source: VaasaETT data provided to ACCC. Figure 6. Indicative international electricity prices 2018. Nominal terms, incl. GST. Source: ACCC 2018.

20 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity

$ per megawatt hour

140 South Australia Queensland Victoria New South Wales 120

100

80

60

40 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2019 2020 2021 2022 2023

Years 205221_005

Figure 7. Quarterly base futures prices, Q2 2019 – Q1 2023. Source: AER 2019.

Energy Productivity ($m GDP or GSP / PJ) 450

400

350

300

250

200

150 South Australia 100 Australia NEPP target 50

0 1 9 8 - 0 1 9 - 2 1 9 3 - 4 1 9 5 - 6 1 9 7 - 8 1 9 - 0 2 0 1 - 2 0 3 - 4 2 0 5 - 6 2 0 7 - 8 2 0 9 - 1 2 0 1 - 2 0 1 3 - 4 2 0 1 5 - 6 2 0 1 7 - 8 2 0 1 9 - 2 0 1 - 2 0 3 - 4 2 0 5 - 6 2 0 7 - 8 2 0 9 - 3

Years 205221_004 Figure 8. South Australian and Australian energy productivity performance. Source: Department of the Environment and Energy (2018).

CONSULTATION PAPER 21 Sustainably Growing Energy and Mining in South Australia

Increased energy competitiveness and productivity have two primary impacts on economic growth. More ? productive, energy-intensive sectors will be more inclined Should we to grow and/or establish in South Australia. South Australia adopt an energy also has the potential to produce and export more – and productivity new – energy products. At a time of growing international concern around the risk of carbon liabilities in finance, target? insurance, and product sources, South Australia could offer a low-risk investment destination. Exporting South Australian sunshine is now a real possibility due to advances in hydrogen and ammonia production linked to renewable energy storage and transport and the emergence of demand particularly in North Asia led by Japan and South Korea. Following the closure of the Hazelwood power plant in Victoria, South Australia became a net electricity exporter into the National Electricity Market in 2018. This represented a turnaround of 3033 GWh and reduced the State’s reliance on energy imports. Interstate exports of gas, steel, gold and mineral sands are already substantial contributors to South Australia’s two-way trade across our borders. Energy offers the potential to provide another significant addition to this cross-border trade, particularly with improved transmission interconnectivity within the State such as a proposed upgrade for the Eyre Peninsula and through a reformed National Electricity Market (NEM) that encompasses renewable energy zones. In the short to medium term, the recent upgrade of the Heywood Interconnector with Victoria has bolstered a significant expansion in interstate trade in energy generation with a potential for further increased exports using the proposed South Australia-New South Wales Interconnector between Robertstown in the Mid-North of the State and in the NSW Riverina. Effectively managing the expected growth in electric vehicle (EV) ownership (up to 50 per cent of new car sales are forecast to be electric by 2030) also provides significant opportunities for the State. The transition to EVs can be expected to reduce transport costs, and contribute to smarter cities and reduced greenhouse gas emissions. There are also broader energy market opportunities for South Australia from growth in EV use. Firstly, expanded EV ownership will drive increased demand for electricity. Secondly, productive investment in demand management and smart grid technology should put downward pressure on electricity prices.

22 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity Key growth opportunities

South Australia’s key opportunities The internationalisation of the resources to grow its energy and mining sector sector also offers growing export include expanded copper, steel and opportunities for South Australian-based lead production, mineral and petroleum METS suppliers, particularly in innovative exploration that has the potential to and technology-focused concepts such lead to new discoveries, development as automation and machine learning. of renewable energy generation and South Australia’s ambitions for energy storage, and potential new export and mining also align with Australia’s industries such as hydrogen and National Resources Statement, which ammonia. sets out the Commonwealth’s policy and Supporting low-cost energy delivery at long-term reform agenda to position nationally competitive prices also has the nation’s resources sector as the spill over effects for existing local energy world’s most advanced, innovative and intensive industries and as an investment successful. attraction tool. Similarly, the COAG Energy Council is Key drivers of growth will be South developing a Strategic Energy Plan to Australia’s global reputation as a provide a clear focus for the Council’s prospective jurisdiction for in-demand priorities and ensure clarity of direction commodities such as copper, iron ore, to both the three key market bodies graphite, zinc, gold, silver, zircon and represented by the Energy Security other heavy mineral sands. Board and participants in the National South Australia’s stable government Electricity Market. This ongoing work and open and transparent regulatory will also feed into the key opportunities processes and a positive record as a for growing the energy sector in South reliable global supplier also support Australia. future growth. Demand for commodities continues to be driven by the continued urbanisation in Asia, a global transition toward low-carbon forms of production, transport and energy generation and ? What other growth sustained global economic growth. opportunities should we Facilitating the existing pipeline of be pursuing? Are there any transformative investment projects in both the resources and energy other opportunities for sectors will create demand for jobs and leveraging South Australia’s opportunities for the Mining Equipment, clean energy transition to Technology and Services (METS) sector as well as generate and sustain demand for grow jobs and investment? a highly skilled and diverse work force.

CONSULTATION PAPER 23 Sustainably Growing Energy and Mining in South Australia Key challenges

The greatest challenge to sustained growth of South Australia’s energy and mining sectors is sensitivity to ? international headwinds such as foreign Are all the key exchange movements, commodity price challenges to fluctuations, a possible retreat toward strong sustained trade protectionism and a slowdown in economic activity in Australia’s major growth in the trading partners. energy and Maintaining growth at an average mining sector 3 per cent is also unprecedented in a captured in the contemporary context although South Consultation Australia has historically benefited from international copper booms, favourable Paper? terms of trade and a turn of the century upswing in iron ore prices. Domestically, the challenges include, but are not limited to: •• a reluctance by alternative land users to embrace coexistence •• high cost of servicing remote locations with infrastructure exacerbated by an inability for industry to effectively collaborate on allocation of investment toward shared infrastructure •• difficulties in attracting capital market investment to fund project development •• federal-state policy uncertainty, particularly in energy and climate change interaction, that discourages investment •• a geology that hides significant ore bodies at a greater depth of cover than competing resource jurisdictions.

24 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity Government role and focus

The South Australian government Existing effective energy and mining recognises the primary role of private industry engagement structures include: investment and innovative effort by •• the South Australian Minerals and industry in delivering economic growth Energy Advisory Council from the energy and mining sector. •• the South Australian Minerals and The growth targets proposed in Petroleum Experts Group this sector Strategy are intentionally •• South Australian Chamber of Mines ambitious. They will require a sharp focus and Energy, Association of Mining and on addressing constraints to growth and Exploration Companies, Australian facilitating the already foreshadowed Petroleum Production and Exploration pipeline of investment projects if they are Association, Australian Pipelines and to be realised. Gas Association, Australian Energy Council and the Minerals Council of The government focus is to build the Australia environment for competitive businesses to succeed and create the conditions for •• industry strategies such as Copper Strategy, Magnetite Strategy, the business and economic growth. Critical Roadmap for Unconventional Gas micro-economic reform will address Projects and the Hydrogen Action misaligned incentives that lead to Plan inefficient or uncoordinated investment in key infrastructure, as well as de-risking •• company-level engagement for growth opportunities through improved major projects conducted through strategic planning at a state-wide level. the Resources Investment and Infrastructure Task Force, Steel Task In the following section of this Force, the Roundtable for Oil and Gas Consultation Paper, policy priorities Projects and the Hydrogen Economy and scope for further action have Steering Committee. been organised under the Growth State streams of trade and investment, The South Australian government has infrastructure, innovation and skills, and recently adopted commodity-based land, water and environment. strategies with the aim of providing leadership in strategic planning, guiding These proposed energy and mining industry collaboration and facilitating priorities have been developed based project management through the on existing industry strategies and assessment and approvals phase of government programs. development.

CONSULTATION PAPER 25 Sustainably Growing Energy and Mining in South Australia

Commodity-based industry strategies continued engagement with major such as Copper Strategy, Magnetite and emerging trade partners Strategy, and the Hydrogen Action Plan •• collaborative strategic planning have helped to sharpen the State’s focus •• supporting the development and on accelerating investment in areas uptake of innovative mining and of the economy where there is a clear exploration technologies, especially competitive and comparative advantage. those that create export opportunities An updated Roadmap for Oil and Gas for the METS sector Projects in South Australia is in progress •• streamlining land access for release in late 2020. •• supporting the development of The government has also designed a innovative technologies in the energy Multiple Land Use Framework to help sector, including opportunities to encourage coexistence with different normalise and adopt hydrogen to industry sectors to improve the decarbonise the energy supplies productivity and efficiency of capital •• further energy market reform to allocation. encourage greater productivity, South Australia also supported the reduction in carbon risk through Commonwealth Government’s review of integrated policy, and market access arrangements for the Woomera evolution to maximise the benefits of Prohibited Area (WPA) conducted in 2018 renewable energy sources. by Dr Gordon de Brouwer PSM. While the recommendations of the review reinforced the critical importance of the WPA to ? Are there any priority national security, they also recognised the areas that should be the area’s considerable value to South Australia for other economic activities including focus of the Energy and mineral resources development. To achieve Mining Strategy? the aims of the Magnetite Strategy, it will Is there a greater be critical to develop the sector’s potential outside of the WPA. or lesser role for For the energy and mining sector to government/industry? significantly contribute to Growth State, Where can the South the government will need to build Australian government on this solid foundation of work and sharpen its focus on the key areas of: work in collaboration •• reducing red tape and entrenching with industry, more efficient, digital-by-default Commonwealth assessment processes Government and •• facilitating the capacity of major projects to attract capital investment national industry groups •• improving and promoting the State’s to support the Strategy international attractiveness as an over the next 5-10 years? investment destination through

26 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity Energy and mining priorities

Growth State – Our Plan for Prosperity will consist of policies, programs and projects collectively designed to ? lift the State’s competitiveness and attract investment, In each of the with a focus on export sectors across four broad streams of government action – trade and investment, skills four streams, are and innovation, infrastructure, and land, water and the the proposed environment. industry goals, The Energy and Mining Strategy seeks to be a clear key challenges statement of the energy and mining industries priority needs in contributing to stronger economic growth. and scope for Government will consider these priority needs through further action both the development of Growth State policies, programs correctly and projects and the work of the Department for Energy identified? and Mining or in collaboration with other government agencies and advisory bodies. Collaboration with the What more could Department for Trade, Tourism and Investment, the be done? Department for Innovation and Skills, Primary Industries and Regions SA, the Department for Environment and Water and Infrastructure SA will help to guide both priority needs and policy, program and project implementation. Industry collaboration through existing steering committees and Task Forces will also play a critical role in addressing these priority areas. The Energy and Mining Strategy seeks to establish a goal, recognise a challenge and plot a way forward for each of the priorities. Trade •• The goal Grow production of in-demand commodities such as copper, magnetite, oil, natural gas, critical battery chain minerals and steel, and develop export pathways for steel, hydrogen and ammonia. Triple copper production through expanding existing exporters and discovering new copper resources, facilitate $10 billion of investment in iron ore projects, enable the Whyalla Steelworks Transformation and support the first shipments of South Australian hydrogen to North Asia.

CONSULTATION PAPER 27 Sustainably Growing Energy and Mining in South Australia

•• The challenge Provided a financial arrangement to Ensuring that the expansion of support the Transformation copper production captures value- to maintain lead, silver and other add processing in South Australia, metal exports. debottlenecking road, rail, power, gas and water infrastructure to •• Scope to go further enable greater commodity exports, Update South Australia’s Copper encouraging investment in a Strategy to sharpen its focus on hydrogen-export facility. Streamlining expanding existing production, land access and encouraging broad gathering and publishing acceptance of multiple land use geoscientific data through innovation, frameworks. Attracting sufficient surveys and supporting drilling capital to develop new port facilities campaigns that use new technologies and associated transport infrastructure and techniques to assist explorers such as rail, road and pipelines. target new deposits to add to the State’s resources inventory. •• What has been done to date Supported exploration through Align with the work of MinEx investment in new geoscientific data, Cooperative Research Centre to declared BHP’s proposed increase in develop and apply innovative production at Olympic Dam a major techniques and technologies that development and promoted South improve the efficiency and therefore Australia’s Copper Strategy to global drive down the cost and reduce the buyers and investors. risk of exploration under cover. Supported the widening of the Update the Magnetite Strategy channel for access to Outer Harbour, to acknowledge the substantial encouraged the opening of the Port investment in new technology and of Whyalla to third-party access, facilities required to transform GFG provided strategic planning on Alliance’s Whyalla Steelworks as well as regional mining and infrastructure SIMEC Mining’s intention to develop options including a deep-water South Australian magnetite resources port in the Spencer Gulf, developed beyond the Middleback Ranges for a Hydrogen Action Plan to identify local processing into steel exports. The export pathways for locally-produced Strategy will continue to facilitate iron renewable hydrogen and ammonia. ore projects in the Braemar Province, Far North and Eyre Peninsula that have Co-designed, with industry an export focus. collaboration, a Magnetite Strategy that identifies potential mining Investigate and capture, through projects and port and infrastructure the value chain, trade opportunities options to establish export pathways presented by our battery mineral but also includes support for the resources and current battery Whyalla Steelworks Transformation. assembly activities.

28 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity

Facilitate the development of a renewable hydrogen export economy through enabling Scaling up hydrogen’s export development of significant scale potential renewable energy production both Since the launch of the South solely or mainly for the purpose of Australian Hydrogen Roadmap, we have hydrogen production. Continue implemented initiatives to assist the international engagement with gradual scaling up of this fledgling markets that will be demanding industry, such as: renewable hydrogen, and a invested more than $17 million in four pathway to using hydrogen to green hydrogen projects decarbonise energy supplies, developed an interactive hydrogen developing local economies of map to help investors and project scale and adopting new electricity developers identify potentially suitable storage options. sites in South Australia for hydrogen infrastructure Inform the work of Infrastructure SA on five-year and 20-year strategies attracted the 2019 International to prioritise pathways for exports Conference on Hydrogen Safety of expanded mineral resources to Adelaide and South Australia’s Hydrogen Action Plan production and the development of new energy exports such as supported Australian Chief Scientist hydrogen. Dr Alan Finkel’s proposal for the COAG Energy Council-endorsed National The efforts of the Department for Hydrogen Strategy Trade, Tourism and Investment become an observer to Hydrogen to step up engagement with key Mobility Australia’s member meetings markets will also support efforts to established a cross-government boost our trade potential. Hydrogen Regulatory Working Group The Commonwealth has also sponsored the Future Fuels Cooperative secured Free Trade Agreements Research Centre (FTA) with China, Japan, South sponsored the 2018 CSIRO National Korea, New Zealand, Singapore, Hydrogen Roadmap Thailand, the U.S., Chile, the supported delegations to and from Association of South East Asian Japan and South Korea Nations (ASEAN), Malaysia, and Canada and Mexico through the opened representative offices in Comprehensive and Progressive Shanghai, Tokyo and Kuala Lumpur to support trade and development. Agreement for Trans-Pacific Partnership (CPTPP). Local exporters South Australia’s growth agenda will should be encouraged to leverage support ongoing efforts to guide the these access agreements that continued development of a local reduce and eliminate barriers to hydrogen industry. Australian goods and services.

CONSULTATION PAPER 29 Sustainably Growing Energy and Mining in South Australia

Investment Provided $50 million for the Grid- Scale Storage Fund and $100 million •• The goal to the Renewable Technology Fund Attract new capital investment in to support investment in low carbon value-added minerals and petroleum energy projects. extraction and processing, renewable energy generation, hydrogen Participated in national and production and distributed and grid- international industry forums to scale storage technologies and ensure showcase and promote South South Australia is globally recognised as a desirable investment destination. Australia as an investment destination. •• The challenge Provided funds to support early International perception that the works for the delivery of a new absence of integrated energy and interconnector with New South climate change policy at the national Wales to provide South Australians level is discouraging investment with access to cheaper energy prices, decisions. a more reliable supply and more Overcoming the comparative opportunities to export renewable disadvantage of South Australia’s deep energy. cover that creates a higher risk for Attracted the International Hydrogen exploration companies seeking to find new discoveries to add to the State’s Safety conference to Adelaide. resource inventory. •• Scope to go further Ensuring effective, efficient Work with the Commonwealth and and transparent environmental other States and territories through assessments and permitting of the COAG Energy Council to develop investment projects. a clear and long-term climate change Modernising safety regulations policy that incorporates energy policy. around gas production, storage Support the work of the Australian and transportation to reflect the Energy Market Operator to implement emergence of hydrogen as a new no- an integrated system plan that carbon fuel source for transport and energy generation. encourages further investment in energy generation and transmission. •• What has been done to date Supported major development Continue to enable and facilitate assessment of major mineral grid-scale storage and renewable production and processing facilities energy generation to provide reliable such as BHP’s Olympic Dam and the and secure electricity. To more Port Pirie Transformation. economically manage a national Committed $50 million towards co- electricity market approaching 50 per investment in developments that cent renewables and one with electric support the sustainability of steel vehicle sales penetration of 15-50 per manufacturing in Whyalla. cent by 2030.

30 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity

Encourage the implementation, Skills and innovation and local development, of demand management concepts such as •• The goal Virtual Power Plants and smart grid Increase the number of South management. Australian school leavers seeking to become mining and energy industry Work with GFG Alliance on its graduates and skilled workers, proposed 1 gigawatt renewable attract high-skilled workers to South energy supported intensive industrial Australia in alignment with the State’s hub in the Upper Spencer Gulf as well population growth strategy and as the other 7 gigawatt of renewable foster industry innovation including generation and 5 gigawatt of storage collaboration with universities and projects under development in South start-ups on research, development Australia ranging from wind and and commercialisation of new solar farms through big batteries and concepts and technologies. pumped hydro to compressed air •• The challenge energy systems. Innovation in exploration required to Expand wind and solar projects into support resource discovery. new renewable energy zones in Imperfect industry signals for energy the Far North and Eyre Peninsula in and broader resource efficiency and line with the rollout of transmission productivity. infrastructure upgrades. Attracting undergraduates into Facilitate case-managed project science, technology, engineering assessment of major mineral and mathematics (STEM) courses production and processing facilities such as geoscience and engineering such as BHP’s Olympic Dam and OZ to support the energy and mining Mineral’s Carrapateena expansion. sectors. Crystallise the commitment of Skilling young people for entry-level $50 million towards co-investment jobs in mining, onshore oil and gas in developments that support the production and the hydrogen supply sustainability of steel manufacturing chain. in South Australia and the Whyalla transformation. Building the capacity of Aboriginal students and enterprises to seek jobs Engage with Japan and South Korea and business opportunities in the to support the signing of supply resources and energy sectors. contracts for South Australian hydrogen exports. Encouraging the private sector to work more closely with academia and Support the domestic hydrogen start-ups to identify challenges to sector through opening multiple overcome through technological and value streams. conceptual innovation.

CONSULTATION PAPER 31 Sustainably Growing Energy and Mining in South Australia

•• What has been done to date Foster productivity in the upstream Supported the University of Adelaide petroleum sector through the to develop industry-focused courses Roundtable for Oil and Gas. and work with the private sector Continue to foster collaboration on industry specific research and between academia, start-ups and the development opportunities that private sector. support innovation. Engage with the Office of the Industry Established the Onshore Petroleum Advocate to develop a framework for training facility at the Tonsley the Far North Aboriginal Economic innovation precinct. Collective and its aim to increase employment and business growth for Engaged with the Resources and Aboriginal people in South Australia’s Engineering Skills Alliance (RESA) to Far North. promote job opportunities in the resources and energy sectors. Infrastructure Established Stronger Partners, •• The goal Stronger Futures and facilitated the Efficient infrastructure services are Cooper Eromanga Basins Aboriginal available to meet industry needs Conference (CEBAC) to improve in unlocking the potential value of industry engagement with traditional South Australia’s energy and mining owners. sectors and transforming our existing resource value-adding industries. •• Scope to go further Support innovation in private Energy infrastructure to support exploration through precompetitive reliability and system security and more affordable supply to enable geoscience. economic growth. Improve energy (and broader •• The challenge resource) productivity through Recognising emergent infrastructure energy market reform and efficiency demand – in the past decade the measures. South Australian government has Help to design new initiatives to invested significantly in forecasting channel apprenticeship support infrastructure requirements based on specifically into resource and energy the probabilistic assessment of mining focused enterprises including the project potential. METS sector. Historically, Australian governments Promote geoscience and other related had a lead role in constructing STEM skills throughout the school and operating productive multi- curriculum. user infrastructure. Microeconomic reforms introduced in the 1990s led Work with industry to promote the to privatisation of state-owned assets desirability of careers in the resources and the dominant expectation in all and energy sectors. Australian jurisdictions that the private

32 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity

sector will design, finance and operate port capabilities in the Spencer much of the productive infrastructure Gulf including export pathways for required for the resources and energy hydrogen and strategic rail, road, sector. electricity, water and pipelines. South Australia has not historically Establish infrastructure corridors for achieved high levels of coordination highly prospective energy and mining of infrastructure investment regions. particularly across multiple Projects identified for possible commodity types, to reduce the cost inclusion in Infrastructure SA’s 20-Year of investment. Strategy are: However, the private sector faces –– Multi-access, multi-product port(s) significant challenges in the unaided in the Upper Spencer Gulf commercial provision of required assets and facilities. Infrastructure –– SA–NSW Interconnector development relevant to the energy –– Reinforce Eyre Peninsula Electricity and mining sector is synonymous Transmission Network with significant capital cost, long lead times and lengthy payback periods, –– Grid Scale Storage but even this belies the complexity of the geographical, governance, –– Upgrade Far North Electricity and structural challenges facing Transmission Network proponents. –– South East SA (SESA) Gas pipeline •• What have we done to date spur Developed copper and magnetite –– Whyalla gas lateral strategies that include a forum for discussing the potential for shared –– Resource sector rail loops infrastructure. –– Far North water pipeline upgrade Established Infrastructure SA to –– Braemar utilities corridor identify and prioritise infrastructure projects that unlock economic growth –– Sealing Strzelecki Track potential of the energy and mining –– Innovative and soft infrastructure sectors. solutions include: •• Scope to go further Demand management Support the work of Infrastructure Digitisation SA to prioritise projects that support Smart Energy Technologies productive investment in the energy and mining sector including sealing Distributed energy solutions of the Strzelecki Track to the Cooper Basin, expanded multi-commodity

CONSULTATION PAPER 33 Sustainably Growing Energy and Mining in South Australia

Land, water and the should be considered alongside the displacement of higher emission environment sources of power, and the potential •• The goal for the electricity sector, particularly Improve land use allocation to through the uptake of hydrogen, encourage the uptake of its most to be a local and global driver of productive option, streamline decarbonisation. regulation and minimise risks to the •• What has been done to date environment. Enacted transparent and consultative •• The challenge environmental assessment processes Lack of agreement on coexistence through the Development, Mining, models for land use allocation and Petroleum and Geothermal especially in regional South Australia. Energy Acts. Stronger South Australian economic Designed a Multiple Land Use growth and construction activities will Framework to guide more efficient require access to extractive materials resource allocation especially in and efficient materials transport regional South Australia. services to meet construction Partnered with the Goyder Institute demand. to support the work of the GFlows Scarcity of water resources to support project to identify remote water an expected upswing in demand from sources. resource and energy projects. Supported an agreed access regime One-third of the State’s area has for the Woomera Prohibited Area. been set aside for priority use by the Supported the COAG Energy Council Department of Defence for training to redesign the National Energy and research and development. Market to incorporate renewable Increased levels of oil and gas energy generation including South production can be attained but must Australia’s role as lead legislator. do so in ways that minimise aquifer Provided a financial arrangement to impacts. enable a transformation of Port Pirie’s Greenhouse gas emissions associated smelter to improve environmental with oil and gas will inevitably need and health outcomes for the local to be addressed – and technologies community. such as carbon capture, utilisation and •• Scope to go further storage (CCUS) is one such promising Investigate alternative water supplies solution. for remote and regional resources Exports of natural gas will assist projects as well as improved a more rapid switch from coal in understanding of the impacts north Asian economies. A potential and management options for co- increase in fugitive emissions produced water, especially where

34 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity

these alternatives can assist the Streamlining approval processes development of coexistent industries through Commonwealth- such as tourism, defence and State bilateral agreements for pastoralism. environmental assessments in line with the completion in 2019 of the Red tape reduction including greater next scheduled independent review use of LEAN processes and digital-by- of the Environment Protection and default permitting. Biodiversity Conservation Act 1999.

Further legislative and regulatory Facilitate the transformation of the reform to support the development Whyalla Steelworks to enable higher of a hydrogen industry as a no-carbon environmental standards through more efficient steel production and alternative for domestic use, transport energy co-generation. and energy generation that delivers better environmental outcomes. Case studies Coober Pedy

Carrapateena: From discovery to Prominent Hill development of a modern copper- Olympic Dam gold project Carrapateena The discovery of the Carrapateena iron oxide – copper–gold deposit in 2005 is an exemplar of the success of the Plan for Accelerated Exploration Port Augusta Hornsdale (PACE) and the ability of targeted government Port Pirie Jamestown support to bring forward economic activity in the mineral resources sector. The discoveries of Olympic Dam and Prominent Hill had already identified the Gawler Craton as highly-prospective ADELAIDE for iron oxide – copper–gold (IOCG) deposits. However, the drilling intersection part-funded by PACE not only confirmed Carrapateena as a world- class discovery, but also become a major driver of exploration sentiment in South Australia. RMG Services’ discovery with the support of PACE funding led to further exploratory drilling as part of a joint venture with Teck Resources Cominco Ltd Exploration. Reinvigorated interest in the prospectivity of the Gawler Craton led to exploratory drilling by OZ Minerals in nearby tenements that confirmed the Khamsin IOCG deposit in late

CONSULTATION PAPER 35 Sustainably Growing Energy and Mining in South Australia

2012 and subsequently identified the Similarly, the 2018 announcement by Fremantle Doctor and Saddle IOCG BHP of the discovery of a significant deposits as possible extensions of the IOCG intersection at Oak Dam West, Carrapateena mineralisation. All these near both the Olympic Dam and Wirrda deposits are within a 10 kilometre range Well deposits, has rekindled interests of the original Carrapateena discovery. in the prospectivity of the Gawler Craton. This renewed interest is being OZ Minerals subsequently acquired supported by the timely release of the Carrapateena deposit from RMG a pipeline of new geoscientific data Services and announced plans to generated by the Geological Survey begin construction on a self-funded of South Australia (GSSA) through the $916 million mining project. Two parallel PACE Copper-funded Gawler Craton declines have recently reached the ore Airborne Survey and the GSSA’s support body, and Carrapateena is on schedule for the Geoscience Australia AusLAMP for first concentrate production in the project. AusLAMP is using innovative fourth quarter of 2019. magnetotelluric mapping techniques to generate undercover imagery that can OZ Minerals announced in March 2019, assist explorers to narrow their search the results of a scoping study for a block for new discovery targets, improving caving expansion to optimise value the efficiency of high-risk exploration at from the Carrapateena mine and further depth. unlock possible future value accretive options for the Carrapateena Life of Hornsdale: Harnessing energy Province Plan. If approved, the additional storage to improve system circa $1.0 to $1.3 billion investment for security and affordability a Block Cave expansion of the lower portion of the current Carrapateena Sub South Australia’s Hornsdale Power Level Cave has the potential to increase Reserve near Jamestown in the State’s average life of mine copper production Mid-North has demonstrated the from 65,000 tonnes per annum to value of energy storage to the National ~105,000 – 125,000 tonnes per annum Electricity Market by providing fast and from 2026. accurate system security services. A PIRSA study in 2007 found PACE In July 2017 Hornsdale Power brought forward the Carrapateena Reserve, a wholly owned subsidiary of discovery by about 20 years as it is French renewable energy company unlikely private sector investment Neoen, was awarded the contract to would have been backed the high- construct, commission and operate a 100MW/129MWh Battery comprised risk drilling campaign without the of Tesla Power packs at the Neoen support of government funding. By that near Jamestown. measure, Carrapateena’s scheduled first concentrate production in the fourth 70 MW of the battery is contracted to quarter of 2019 amounts to a fast-tracked provide system security services for development from a possible 2036 start South Australia, and the whole 100 MW date in the absence of PACE funding. battery capacity is available in certain

36 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity circumstances, for example, to reduce also stabilised the risks of load shedding during peak the South Australian grid during load periods or due to temporary loss of a massive transmission failure on significant generation or interconnector 25 August 2018 that caused localised capability. blackouts in other states when both the Queensland-New South Wales An April 2018 evaluation of the and the South Australian-Victorian performance of the Hornsdale Power interconnectors tripped. Reserve by the Australian Energy Market Operator found the frequency response The Australia Energy Regulator has found that Frequency Control and Ancillary and control services it provided were Services (FCAS) costs in quarter one 2018 both rapid and precise when compared averaged 57 per cent lower than in the with conventional synchronous previous quarter, despite similar volumes generation. of FCAS being required. This could be The battery’s performance has met contributed to the Hornsdale power and exceeded the expectations of the reserve capturing a large share of the department and saved South Australia FCAS market in the first quarter of 2018. millions of dollars in electricity costs. The The Aurecon report estimated the average availability of the battery to date battery has reduced the South Australian has been 99.8 per cent. regulation FCAS prices by 75 per cent while also providing these services for In an independent report commissioned other regions within the NEM. for the first anniversary of the battery, engineering consultancy Aurecon found The report also found the battery that the battery: contributed to the removal of the requirement for a 35 MW local FCAS, •• has responded thousands of times saving nearly $40 million a year in typical to frequency outside the normal annual costs. operating band. About one hundred of those were serious •• provides a premium contingency service with response time of 250 milliseconds •• helps protect South Australia from being separated from the National Electricity Market •• is key to the Australian Energy Market Operator’s and ElectraNet’s System Integrity Protection Scheme (SIPS) which protects the South Australian- Victorian Heywood Interconnector from overload.

CONSULTATION PAPER 37 Sustainably Growing Energy and Mining in South Australia Appendix 1

Historical events in developing South Australia’s energy and mining industry 1841 – Glen Osmond silver mine produces Australia’s first metalliferous exports 1842 – Discovery of copper at Kapunda 1845 – Discovery of copper at Burra 1866 – First onshore oil exploration well at Alfred Flat near Salt Creek 1880 – Australia’s first iron ore mined at near Whyalla 1883 – Charles Rasp stakes a mineral claim at Broken Hill 1941 – Whyalla Steelworks open 1946 – Establishment of the Electricity Trust of South Australia (ETSA) 1954 – Port Augusta Playford A power station begins generation 1959 – First petroleum exploration well drilling in the Cooper Basin 1963 – Gas discovered in the Cooper Basin 1983 – First exports of crude oil and condensate from Port Bonython 1987 – Gas discovered in the onshore Otway Basin 1988 – First production of copper, gold and uranium from Olympic Dam 2003 – Starfish Hill becomes South Australia’s first major wind farm 2004 – Launch of PACE – the Plan for Accelerated Exploration 2010 – SA’s first feed-in-tariff scheme launched to support home solar PV uptake 2017 – Hornsdale Power Reserve, world’s biggest lithium ion battery, operational 2017 – South Australia’s Hydrogen Road Map first published 2018 – Home Battery Scheme and Grid-Scale Storage Fund launched

38 CONSULTATION PAPER A Strategy to Support Growth State – Our Plan for Prosperity Next steps

Feedback •• Are all the key challenges to strong sustained growth in the energy Due 1 November 2019 and mining sector captured in the Feedback is sought from stakeholders Consultation Paper? (page 24) on this Consultation Paper and the proposed actions in the Energy and •• Are there any priority areas that Mining Strategy. should be the focus of the Energy and Mining Strategy? Is there a greater or Questions to be considered lesser role for government/industry? •• Is energy and mining as a sector Where can the South Australian identified appropriately? (page 10) government work in collaboration •• Are these four targets achievable with industry, Commonwealth and sufficiently bold to support our Government and national industry Growth State ambitions? Can these groups to support the Strategy over targets serve to identify industry’s the next 5-10 years? (page 26) barriers and opportunities for stronger economic growth? (page 12) •• In each of the four streams, are the proposed industry goals, key •• Should we adopt an energy challenges and scope for further productivity target? (page 22) action correctly identified? What more •• What other growth opportunities could be done? (page 27) should we be pursuing? Are there any other opportunities for Launch of the Strategy leveraging South Australia’s clean energy transition to grow jobs and Public launch of the Strategy expected investment? (page 23) first Quarter 2020.

Contact Department for Energy and Mining 11 Waymouth Street, Adelaide South Australia, 5000 GPO Box 320, Adelaide, South Australia, 5001 E: [email protected] www.energymining.sa.gov.au/growthstrategy

CONSULTATION PAPER 39 Sustainably Growing Energy and Mining in South Australia

02/10/2019_205221 40 CONSULTATION PAPER