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New oil province could enhance Australia’s energy security

Tue 21 Jun 2016

New oil province could enhance Australia’s energy security
Matthew Doman: “local production has been falling steadily. Australia has less than 10 years of proven domestic crude oil reserves left”

The Australian Petroleum Production & Exploration Association (APPEA) says recent hearings by the Senate Environment and Communications References Committee and an inquiry into oil or gas production in the Great Australian Bight were an opportunity to answer questions and address concerns about the industry’s activities.

APPEA South Australia/Northern Territory director Matthew Doman said the economic case for the safe and sustainable development of a new oil province was clear. He said finding a major new oil source would help address Australia’s widening trade deficit in a vital commodity.

“About 80 per cent of the oil we use in Australia is imported, costing us around A$34 billion (US$25.1 billion) a year,” he said. “Local production has been falling steadily. Australia has less than 10 years of proven domestic crude oil reserves left. The Great Australian Bight could be the new oil province that boosts our energy security for decades to come.”

Mr Doman said the oil and gas industry was one of Australia’s highest value-added industries, generating highly skilled, high wage jobs. “Apart from the thousands of people directly employed in upstream exploration and production, the industry employs many more people, directly and indirectly, in downstream processing, engineering and other services,” he said.

Mr Doman said Australia’s regulatory regime had been transformed in the last five years to be “truly world class”. He said its strengths included a single, independent regulator with deep expertise in the offshore environment; an unambiguous focus on rigorous risk assessment, free from political or other influences; a very conservative approach that requires risks to be reduced to as low as reasonably practicable; and an objectives-based approach that is more flexible than prescriptive regulation and promotes continuous improvement.

Mr Doman said that, if current plans were approved, the industry would spend more than A$1 billion (US$738 million) on near-term exploration work. “With proper regulatory oversight, there is no reason a safe, sustainable offshore petroleum industry should not be possible for South Australia and that residents of the state should not benefit from the investment that will be made and jobs created,” Mr Doman said. “The industry’s record of safe, sustainable operations offshore in neighbouring Victoria shows that similar development could occur in the bight with minimal risk to the environment.”

It has also been suggested by APPEA that there is an urgent need to address the severe decline in Queensland exploration experienced over the last five years. APPEA director for Queensland Chris Lamont said the decline in petroleum exploration in the state is leading a national decline in exploration activity for both onshore and offshore activity.

“We have a clear need for more exploration activity, but a plethora of regulatory restrictions and uncertainty are frustrating the industry in ensuring there is the necessary activity in exploration to meet future energy needs,” Mr Lamont said.

Once a shining light for gas exploration, Queensland is now undertaking less exploration than it did 15 years ago. The Australian Bureau of Statistics has confirmed that onshore petroleum exploration fell 27.8 per cent in the December 2015 quarter. The largest contribution to this decrease was Queensland, down 35.1 per cent.

“Analysis of exploration activity confirms that falling commodity prices are just one of the factors responsible for declining exploration,” Mr Lamont said. “It is evident that exploration activity in Queensland was falling well before the relatively recent decline in the global oil price.” Factors explaining the decline in exploration activity include regulatory creep, a lack of highly prospective new acreage, data gaps, diminished access to capital and constraints on access. The industry in Queensland has demonstrated it is highly innovative and competitive, creating an export stream that continues to provide employment for more than 13,000 employees and hundreds of millions in royalty dollars for the state.

“Queensland’s exploration industry is of critical importance to the state’s energy security and is an essential ingredient for future employment and business growth,” Mr Lamont said. “It is vital that Queensland has a vibrant and active exploration sector not just to identify future natural gas sources but also in identifying the most cost-effective and productive areas from which to source supply.”

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