Australian Energy Security in the Asian Century

Energy Insecurities

Energy security is back at the top of the international political agenda. Gone are the days of easy access to known energy reserves – a reality which stands to fuel regional competition and perhaps conflict across the globe as states scramble to secure a piece of what’s left. However, energy security concerns are still far from front and centre for Australian policymakers. Australia’s continental isolation, sheer size and economic reliance upon total net energy imports is set to compromise our future energy security.

The Asia-Pacific region is emerging as the next theatre for global energy insecurity concerns to unfold. As the US pivot shifts attention to Asia away from the Middle East the security of supply for Asia-Pacific energy imports that originate from the region is thrown into question. The US domestic shale gas revolution will position the US to gain energy independence by 2030 as it moves from a net gas importer to a net gas exporter. This means two things for the Asia-Pacific region. Firstly, the region now represents a growing attractive energy market for the US to export to. Sales may be largely based on political pricing – akin to mate’s rates – and supply may be withheld as political punishment for unruly states that opt to exit the US orbit. Secondly, Australia must accept that to China the US gas market looks promising as an alternative to our coal-based energy exports as it shifts from a high-emissions to a low-emission economy that is increasingly favouring gas.

Fuelling the Dragon

Australia’s relationship with China is based primarily around our energy trade, which historically flourished thanks to Australia’s vast coal and iron ore deposits and quite simply; China could not get enough of it. Today, it’s a different story. Spurred by climate change and global pressures over emissions, China has begun to alter its energy mix. China is moving from a high-emission to a low-emission economy, which opts for gas over coal to fuel its growth. It is rapidly investing in green technologies and the renewable sector whilst maintaining a foreign energy import strategy that is characterised by diversification.

China is now the World’s largest net energy importer. China will continue to fuel its growth. US pivot to Asia may be cause for concern for our existing energy relationship with China.

Rebalance: Which way Australia?

The US rebalance and pivot to Asia is coinciding with the emerging offshore energy security quests of a number of Asian-Pacific states. Deep-sea exploration of hydrocarbon reserves poses numerous avenues for both collaborative and competitive ventures in the region. Deep-sea drilling is concurrent with existing maritime disputes – namely those in the South China Sea – that stem from unsettled territorial spats. Such territorial disputes are forewarnings of those that may erupt over continued offshore energy exploration in the region by those states that are technologically equipped to do so. US military presence in the region serves to heighten suspicions and should be greater cause for concern.

Australia’s existing approach to our energy relationship with China is setting us up for failure. Australia requires a robust energy security strategy as we progress into the Asian Century. The existing approach to our energy security centres on the short-sighted ‘dig it up’ and sell it mentality. Australian policymakers are failing to accept that our energy insecurity is a long-term issue that we appear to be failing to take seriously.

Recommendations for Securing Australia’s Energy Future

Simply comparing the Chinese energy strategy with Australia’s should be cause for concern in Canberra. Firstly, Beijing has an energy security strategy. I dare say Australia employs an approach and lacks any robust energy security strategy – Australia does not possess an energy reserve capable of keeping the state moving for more than 48 hours if supply security is compromised externally. Secondly, China’s energy strategy is architected to secure its energy needs in the current climate of global energy insecurity. Not only does it ensure diversification of supplies, the strategy also extends to the hybrid area of future energy sources.

Australia appears to lack the foresight to commit to and invest seriously in the renewable and green technology spaces. Naturally endowed with vast energy reserves Australia must begin to tap into the existing lifeline. Following the US by achieving energy independence by way of shale gas is a tangible pathway for Australia. Instead, we appear to be falling behind the pack.

China has all but cemented its energy mix shift to reduce its reliance upon coal and is looking to gas as a cheaper and cleaner alternative. The US is emerging as a major gas supplier, set to secure its energy independence by 2030. Yet, Australia remains entirely reliant as a net energy importer and exporter to a 2014 China that is slowly weaning itself off the sole export we peddle. Australian policymakers must start to caution the impact of the rapid development of US energy exports will have upon our own exports. It appears that we are failing at both the security of supply and security of sale components of energy security.

Australia must look to both the US and Chinese energy strategies. Canberra must start seriously looking to green technology and investing in the renewable sector or even start exploring our potentially game changing shale gas deposits. Either avenue provides our future generations with an energy independent and ultimately secure Australia. Opting not to wake up to our energy insecurities will undoubtedly secure our status as the ‘lucky country’ left out in the dark.

Elizabeth Buchanan is a PhD candidate at the ANU Centre for European Studies. She has experience working in the resources sector and on the US-Russian Arctic Dialogue. She is currently the manager of the Rio Tinto China Economy Program at the Crawford School of Public Policy, ANU.