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Industry reinforces wish list

Australia’s pipeline and petroleum industries have delivered strong warnings to the Federal Government over the past fortnight.

Statements coming out of the national conference of the Australian Pipeline Industry Association forecast a crisis in efficient pipeline infrastructure development, while the Australian Petroleum Production & Exploration Association further admonished the Government on a potential oil supply deficit.

APIA executive director Allen Beasley said while Australian pipeline development had been strong in recent years, the industry faced design, construction, investment and operation hurdles.

Industry, Tourism and Resources Minister Ian Macfarlane responded to some regulatory concerns, advocating one regulator to cover Australian electricity and gas markets, rather than the 38 individual regulators which now oversee different electricity, gas or combined jurisdictions.

APIA president Jim McDonald refuted regulators’ continued assertions that the national gas code had facilitated new pipeline development and that returns allowed by the generators were generous.

Mr McDonald told Senator Macfarlane and other conference delegates economic regulatory narrow-minded self-interest had been masquerading as gas policy.

"This has already undermined and devalued the potential development and growth of the gas transmission sector," he said.

Mr McDonald directed the Federal Government to 33 changes recommended in the Productivity Commission’s Nat-ional Access Regime report.

He described as "positive" the Government’s interim response, which recognised the need for the strengthening of commercial negotiation incentives and encouragement of efficient investment in new infrastructure.

He also welcomed the Government’s intention to clarify the objectives and scope of the access regime and to improve the certainty and transparency of regulatory processes.

Mr McDonald called for Government of the roles of regulators, pointing out the Australian Competition and Consumer Commission’s dual roles of consumer advocacy and gas access regulation.

APIA members were also concerned that supply projections were optimistic, Mr McDonald said.

He warned of falling gas supply and rising prices, a theme also contained in APPEA’s response to the Federal Government’s ‘Inquiry into Resource Exploration Impediments’, but in relation to the nation’s oil supplies.

APPEA delivered a five-point tax plan direct to Senator Macfarlane’s desk.

The proposed tax changes would help alleviate what the association saw as an impending fuel production crisis, APPEA executive director Barry Jones

said.

Australia needed to find a super oil field to ensure adequate and secure supply, and prevent a potential drain on the nation’s economy of between four and eight billion dollars by 2010, Mr Jones said.

This meant increased frontier and deepwater exploration was essential.

Production was forecast to halve in the next eight years, if no change occurred within the present system, he claimed.

Hence the tax plan was designed to encourage further exploration, through increasing the rate at which expenses could be carried forward for write-off, introducing a barrel of oil equivalent exemption for future developments in areas for which the petroleum resource rent tax was payable, and extending the full factor growth period.

The plan also recommended an exploration premium of up to 175 per cent for government-nominated acreage, and share flow-through provisions.

"We need to treat high-risk frontier development as we do R&D," Mr Jones said.

Mr Jones said the Government appeared willing to look at share flow-through arrangements and the industry was willing to help structure an appropriate system.

"It needs to be carefully designed so that it puts money into the hands of the explorers, but is not a rort," he said.

Mr Jones said favourable tax and royalty changes had produced positive increases in exploration when needed in the North Sea, the Gulf of Mexico and New Zealand.

The Government would benefit from increased Australian oil exploration in three ways, he said: through income from new projects; improved balance of payments figures as soon as new oil was found; and greater security of supply.

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