I believe that energy security is possibly the most vital issue that confronts our nation. 

Considering all the issues that now face us, that might sound like a big call.  But energy is the lifeblood of Australia’s mining and manufacturing economy which together accounts for 80 per cent of our exports.  At the same time, energy security is pivotal to the big issues of climate change, our capacity to meet the greenhouse challenge and the economic turmoil. 

And the south-west region of Western Australia is a piece in the global jigsaw.

Without doubt, energy security is much more than simply evaluating sources and reserves.  It must include an analysis of the needs of domestic users, detailed work on critical infrastructure and the security and maintenance of that infrastructure.  It also must look at contingency planning and supply vulnerabilities in the various energy sectors.

My belief is that we must develop a national security strategy to guarantee Australia’s energy requirements for the next 50 to 100 years.  For too long we have been focused on expanding and maximising energy exports without proper protection for our own and future generations.  We have not been as disciplined as we should have been in framing an energy security strategy.

To be blunt, competition and diversity of gas supply has to be a priority.   

The facts are that gas contracts are written for the long term, often 20 or 30 years into the future.  This means that the gas going to overseas competitors is not available for the current and future needs of the local economy.  As a result, foreign contract prices have been regularly spiraling upward with telling consequences for local users.  Indeed, recent local contracts for gas in WA are three times higher than historical prices and wholesale gas prices are three times eastern states prices on a delivered basis.

We have an immediate need to guarantee domestic and local industry security of gas supply at a competitive price.

And what about climate change - the issue which is the catalyst for the re-shaping of our world?  Apart from security of energy supply, the climate change challenge is the other major issue confronting industry and the global community going forward.

Alcoa’s stance on climate change is clear – any future emissions trading scheme must not only support global carbon reductions, but also secure Australian investment and jobs.  If Government disregards this fine balance and penalises Australian companies by regulation, the result would inevitably lead to the compounding of the economic downturn.  It would also be counter-productive to the objective of reducing global greenhouse gas emissions.

It is essential to construct the appropriate balance between the interests of climate and industry.  And we have to facilitate reduced greenhouse gas emissions, while maintaining the sustainability of Australian industry and its competitiveness.

Let us look at the big picture.  It is widely accepted that gas produces up to 70 per cent less greenhouse emissions compared to coal in electricity generation.  Supply shortages and escalating prices are forcing resource companies and power generators to switch to coal.  Admittedly this is cheaper, but there are implications for Australia’s carbon footprint.

The facts are that gas well and truly bridges the time required to develop significant alternative, renewable energy sources as part of the greenhouse solution.  Research undertaken by the Business Council of Australia reveals that many low-emission technologies, with the exception of natural gas, will not be substantial contributors until after 2020.

Essentially gas, as the cleanest transitional fuel, is an essential part of the jigsaw which is Australia’s evolving solution to climate change.

It is estimated that Australia has natural gas reserves equivalent to 100 years of production, the bulk of them in the Bonaparte, Browse and Carnarvon basins off WA’s north-west coastline.

Considering these immense gas reserves off our coast, it would be inexcusable for West Australian industry and energy generators in particular to be denied acceptable supplies.

Alcoa’s position is clear – we need to facilitate domestic gas growth to reduce greenhouse gas emissions, while maintaining the sustainability of Australian industry and its competitiveness.

Alan Cransberg made the luncheon address at the Australia’s South West Global Focus conference on Wednesday 26 November 2008, Perth.