"Delivering the Prime Minister's own call for a "strategic plan for longer term energy policy" is not a matter of merely micro managing the retail and distribution sectors," APPEA's Executive Director, Barry Jones, said last week.

"It is simply the wrong route, and is placing Australia further and further behind the eight-ball in efforts towards installing a much-talked-about national energy policy," Mr Jones said.

"Instead, there are vital energy demand issues that must first be addressed and critical supply investments that need to be facilitated."

Jones said key elements of any strategic plan for longer-term energy policy must include an oil exploration and development strategy; and a natural gas development strategy covering both the domestic and export markets.

Jones said the current mass of retail sector related detail was swamping Prime Ministerial leadership, bi-partisan political support at the State and territory level and strong support from all resources sector ministers towards achieving a strategic plan for the nation's long term energy policy.

"The unfortunate result is that we only have some of the pieces of the energy policy jig saw puzzle," he said.

"We seem to have lost the picture we are supposed to be building and we also seem to have misplaced those pieces that relate to energy supply."

He said the context for a strategic plan needed to encompass several factors, including: focussing on a 20-year time frame; recognising that demand for energy will grow; addressing the fact that energy prices will rise and accepting that social attitudes cannot remain unchanged.

"Most importantly, it needs to be based on a clear understanding that without massive investments right across the sector, there is a high risk of energy supply disruptions in the not too distant future".

"Three national goals need to be set for the strategic plan - (1.) A target for constraining growth in energy demand; (2). Priorities for investment to close the growing gap between demand and national supply for petrol and other transport fuels; (3). A vision to address the need for appropriate investment to change the fuel mix for Australia's electricity supply."

Jones said slowing energy demand growth was critical as a challenge in itself and as a factor in dealing with the transport fuels and electricity challenges.

"We need to face difficult social issues about slowing population growth, changing lifestyles and using energy more efficiently," he said.

On the growing gap between demand and national supply for petrol and other transport fuels, Jones said two matters were paramount.

"There needs to be a national petroleum exploration strategy that aims to maximise the benefits for Australians of the national petroleum resource endowment. This strategy needs to deliver public and private funding for frontier exploration, more attractive fiscal terms for capital raising, exploration and development and more effective approvals processes," he said.

"Efforts by Minister Ian Macfarlane to address these issues in a comprehensive way are refreshing and welcome by the industry and need the strong support of State ministers and his national colleagues."

Jones said the other transport fuel issue that needed to be clearly addressed was the economic, social and political risks associated with a growing reliance on imported petroleum supplies.

"The nation really needs to consider whether a sensible precautionary approach to these risks means having a strategy that encourages both more national investment in petroleum refineries and more national investment in commercially viable alternative energy sources," he said.

"Inevitably, this latter issue means a longer term focus for a national strategy must address the need to facilitate a higher level of investment in natural gas based transport fuels including gas to liquids and eventually hydrogen."

On the issue of the fuel mix for electricity generation Jones said: "There are two issues. First, we need to focus on how demand growth over the next 10 to 20 years will be fuelled. Then we need to think about the longer term issue of how the existing base load generation might be replaced over time."

While stressing that a mix of approaches would be necessary to address both these issues, Jones said it was certain that natural gas would be a major fuel for meeting both short and medium term demand growth and longer term industry reconfiguration.

"Whichever way we look at things, the existing strategy for facilitating natural gas exports (agreed by the Commonwealth, Western Australia and the Northern Territory) needs to be complemented by a natural gas supply strategy covering both production and transmission to meet national domestic requirements."