Petroleum exploration debate

PETROLEUM industry explorers in Western Australia are calling for greater long-term incentives despite the recent opening of 24 offshore areas for bidding from within the sector. The 2005 release is part of a broader national exploration acreage program that includes five designated frontier areas, which are subject to the 150 per cent frontier tax concession incentive announced in last year’s federal budget. The frontier tax concession applies to those waters that are at least 100 kilometres away from current commercialised oil facilities, according to the Federal Department of Industry, Tourism and Resources. This year, four of the five designated areas are in WA. Federal Industry Minister Ian MacFarlane said the new acreage release was a key part of the Government’s ongoing strategy to encourage more exploration of Australia’s vast offshore sedimentary basins. Mr MacFarlane told the annual Australian Petroleum Production and Exploration Association Conference (APPEA), held last week in Perth, that producers should be encouraged by the tax break but that the greatest incentive for exploration in the industry should be the current high oil prices. But explorers are unconvinced the high price and the tax concession are sufficient to stimulate exploration in the longer term. Locally based Voyager Energy managing director John Blegg said high oil prices did not do much to support frontier exploration. “What you see is the high price encourages projects near existing commercial facilities that were previously not feasible,” he said. Mr Blegg, who has been involved in the upstream oil and gas industry for 24 years, said he believed the Government’s tax concession was a start, but it would take five years to make an impact and more needed to be done to consistently encourage exploration. He added that the high oil price did not improve Australia’s competitive position, as all countries faced the same price. Mr Blegg said he would like to see tax losses to petroleum companies be passed onto investors to make investment more attractive and to make a more immediate impact on exploration in the industry. Meanwhile, in his farewell address to the industry at last week’s conference, outgoing APPEA executive director Barry Jones called for state governments to freeze royalties on petroleum for a 10-year period to further the cause of frontier exploration. The exploration attention in the sector follows calls last week made by Premier Geoff Gallop for the Federal Government to fund a trans-continental gas pipeline. Mr MacFarlane said he considered the premier’s suggestion a joke, arguing it would kill off any incentive for east coast gas development and dampen prospects of a pipeline to be built from Papua New Guinea. Bids for 15 of the 29 new exploration areas will close on October 20 and the remainder on April 20, 2006.