Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

The Offshore Petroleum Amendment (Miscellaneous Measures) Bill 2008 was originally introduced by the previous government—and what a good government it was and what an excellent minister for resources it had!—for the main purpose of updating the longstanding Petroleum (Submerged Lands) Act 1967. It is a technical bill, but it is an important one as well. The Petroleum (Submerged Lands) Act has been the primary legislation for the administration of Australia’s offshore petroleum resources. Now, 40 years on, the legislation has been outgrown. The Offshore Petroleum Act will replace this older act.

This amendment bill will provide clarity and certainty in terms of licence duration and important technical definitions. It will also confer on those in the industry a greater ability to work in the modern environment. As members will have heard, there are three main components to this bill. The first is to correct technical errors. The second is to repeal a provision of the act relating to declarations of emergency by the minister. The third and final component is to convert geodetic data references to the Geocentric Datum of Australia.

While these are not major policy changes, they are important administrative features. They will impact directly on the resources sector. Australia’s resources remain among the most important assets of this nation. They are assets which make an enormous contribution to the wealth of this country not only in terms of exports but also in terms of energy security, the creation of jobs and the underpinning of our entire economic system. It is therefore essential that the operations of those in the industry come under the clearest guidelines and legal frameworks. Higher export prices and anticipated higher prices for commodities, including iron ore and coal, are forecast to see Australia’s energy and mineral exports rise by around 33 per cent to around $153.4 billion in 2008-09.

While the most recent figures show that international demand for energy commodities remained strong in the December quarter, at around $26.7 billion, forecasters also predict that the next financial year will see Australian oil production increase by seven per cent, largely due to increased output at offshore locations. Additionally, Australian oil exports as a proportion of production are projected to increase over the outlook period. With these types of figures in mind, it is therefore essential that the industry has a firm basis on which to operate.

This is an industry which sees literally billions of dollars invested in single projects. From talking with resource companies in the petroleum sector—that is, the oil and gas sector—I know their confidence in those investments is still strong, but we need to ensure that they are able to operate efficiently and effectively and within the guidelines laid down by the community in which we all live. The previous government worked hard to ensure that Australia’s resource sector had a strong future. Last year saw a significant increase in the number of new companies applying to explore in Australian waters, demonstrating that the previous government’s initiatives were there to boost exploration. ‘Confidence’ means both confidence that you can operate in a secure way and confidence in terms of exploration leases—that is, should you find a deposit, you know you will be able then to fully develop that deposit in a proper commercial and secure framework.

To do anything that may damage that confidence, particularly in the area of retention leases, will not only jeopardise the enthusiasm of companies to explore but also jeopardise the enthusiasm of companies to be involved in the development of Australia’s rich petroleum assets. We have seen the previous government work hard to ensure that incentives were put in place for exploration and that security of tenure was provided. Some examples of that include the $58.9 million for research to better understand the geological potential, I am sure, for both minerals and petroleum. As well, we allocated some $76.4 million to encourage exploration in frontier areas offshore. Those frontier areas offer Australia some of the best hope in terms of finding more deposits of oil and gas, particularly oil, to ensure that we are able to supply Australia’s and the world’s growing needs.

The offshore exploration industry has also benefited from the 150 per cent uplift on the petroleum resource rent tax deductions in designated offshore frontier areas under the previous government. The amendments in this bill before the House today will allow this important industry to continue to do its work. You cannot understate the importance of the resource industry to Australia, and you cannot understate the financial risk that companies that invest in that industry take, particularly in the exploration area but also in the development of those products. Updating the Petroleum (Submerged Lands) Act 1967 is something that will enjoy bipartisan support in this House because it is important that both the government and the opposition—that is, the parliament as a whole—send a very clear message to those who are thinking of investing in this field. That message is that Australia is a secure place to invest. If we do not offer that security, if we offer any ambiguity, if we fail to update the legislation which covers this and a whole range of areas then we run the risk of frightening away that investment.

Australia is not alone in petroleum resources. Yes, we have probably one of the most stable government systems in the world. Yes, we have clear delineation in how those processes work. We also have a willing and very highly skilled workforce to both explore and develop those resources, and that goes back many generations. In fact, my grandfather was the senior geologist for the Queensland government and in his day pioneered a lot of work not only in the mineral area of exploration but also in laying down some early prospecting that then led to the successful drilling for gas. It is a great honour for me to still have his geologist’s hammer in my office. I very rarely raise it these days in anger—and by ‘in anger’ I mean to strike a rock, of course; it could be used for other purposes, and those things cross my mind from time to time. But it is a constant reminder to me not only of my heritage but also of the fact that resources, including petroleum resources, have played an enormous part in the development of Australia.

So it is important that this legislation is amended. It is important that we have the most up-to-date guidance legislation in the world. It is important that we continue to attract the investment from overseas that we need. That investment then sees rich fields right around Australia not only explored but then developed. We have some of the highest quality oil in the world, and much of that oil is exported due to the situation with our refineries. As those refineries are set more for the heavier crudes, we see a lot of particularly Western Australian oil exported offshore.

But there is no doubt that we need to find more, and I notice that the Minister for Resources and Energy, Martin Ferguson, is spending quite a bit of energy on seeing how he can encourage that to happen. I commend him on his work on that. Providing that it is done in a sensible way and that, particularly with retention leases, there are no knee-jerk political reactions in terms of the ability of companies to explore and maintain those leases until they can be developed, I can assure the minister that he will enjoy the coalition’s full support.

This legislation will provide a great deal of comfort to those in the industry and to the department that administers it—a department I remain fond of. The work that needs to be done on providing the legislative and legal framework for the petroleum industry to continue to prosper in Australia will continue.

Dick Adams (Lyons, Australian Labor Party) Share this | Link to this | Hansard source

The purpose for, and the background to, the Offshore Petroleum Amendment (Miscellaneous Measures) Bill 2008 are as follows. The Offshore Petroleum Act 2006 has been the primary legislation for the administration of Australia’s offshore petroleum resources for 40 years or more. The act is a rewrite of the Petroleum (Submerged Lands) Act 1967, to bring the language and the structure up to modern standards. The act will result in reduced compliance costs for government and industry.

Since the rewrite, technical amendments have been identified as necessary before the act can be proclaimed and come into effect and the Petroleum (Submerged Lands) Act can be repealed. These amendments are necessary to ensure that the regulatory regime continues to support the efficient exploration and development of our oil and gas reserves. We just heard from the previous minister for resources about the need to make sure that we are at the forefront of encouraging that to happen. The amendments were introduced into the last parliament and the bill passed the Senate as noncontroversial but did not pass the House of Representatives prior to the parliament being prorogued. The Senate Standing Committee on Economics examined the bill and recommended that it be passed due to its primarily technical nature.

The amendment bill, which is of an important but largely technical nature, has three main elements: first, a clarification of the provisions to ensure that they operate in the way that they were intended to, so it is a qualification showing what is actually meant; second, a policy change repealing section 327 of the act, which gives the minister certain emergency powers in Bass Strait, and I think we have improved that security now so the power need not be with the minister; and, third, to convert geodetic data references of the area descriptions in the act from Australian Geodetic Datum to the current Geocentric Datum of Australia. I will explain that a little bit later on.

The technical amendments include the following proposals. The territorial sea amendments correct an inadvertent technical error in the act and ensure that the legislation gives proper effect to the Offshore Constitutional Settlement. Due to an anomaly in the Petroleum (Submerged Lands) Act, licensees applying for a first renewal were entitled to indefinite duration licences. If amendments are made, the affected companies will only have 21-year licences. In terms of the definition of ‘workforce representative’, the act allows federal unions to serve as workforce representatives in an occupational health and safety scheme. The proposal amends the definition of ‘workforce representative’ to allow a transitionally registered association recognised under the Workplace Relations Act 1996 to be appointed. The amendment ensures that all unions recognised under the Workplace Relations Act can be workforce representatives. Those provisions are unlikely to be affected by the government’s election commitments on the changes to the industrial relations system of Australia.

In terms of the geodetic data upgrade, the bill converts the data references of area descriptions to the Geocentric Datum of Australia, or GDA94. GDA94 more accurately reflects global positioning systems, which are increasingly being used for surveying and navigation, and brings new technology into play in the descriptions within the act. In a minor policy amendment, the bill repeals section 327 of the act, which deals with certain emergency powers in Bass Strait, as a more comprehensive and broader security regime is now in place under the Maritime Transport and Offshore Facilities Security Act 2003. In relation to the geodetic data upgrade, the bill upgrades the geodetic datum used in the Offshore Petroleum Act.

To explain this technical matter further, a geodetic datum is a mathematical model of the world. I am sure that Dr Washer would be well aware of that and would have full knowledge of this, whereas some of us laypeople would not have as much of an understanding of it. The Australian Geodetic Datum, or AGD66, was a mathematical model that was designed to fit well with the Australian mainland. As such, its centre was not the centre of the earth. Fortunately, Australia is not at the centre of the earth; it is only that some of us feel that it probably should be. The advent of global positioning systems, such as GPS, added justification for the adoption of an international geocentric—or earth centred—datum. This became the Geocentric Datum of Australia 1994, or GDA94. The change in datum means that the same point on the earth now has slightly different coordinates. The conversion, which is to the accuracy of two decimal places of a second of latitude and longitude, will have an almost negligible effect on the actual position of these points. On the seabed, this would physically represent no more than a plus or minus 0.15-metre shift. There will also be no impact on the existing titles. Timing and other factors prevented its inclusion in the original act, so it is good that we can tidy that matter up.

The bill also does not impose any new regulatory burdens on the petroleum industry and will not have any financial impact on the Australian government’s budget. I am sure that the Treasurer will be pleased that that is the case. The oil and gas industry is critical to the effective operation of the Australian economy. Oil and gas currently account for around 33 and 21 per cent respectively of Australia’s primary energy consumption, which is a 54 per cent total combined share of primary energy consumption; that is a fair lump of the Australian economy.

The oil and gas industry is a creator of significant wealth in the Australian economy, accounting for about 2.5 per cent of Australia’s gross domestic product. The value of oil and gas produced in Australia in 2007-08 is estimated to be in excess of $27 billion, with exports valued at around $16 billion, so this industry is an enormous bringer-in of money for Australia from exports. The industry employs around 15,000 people and will pay about $3.6 billion in resource taxation to the Australian government in 2007-08, so I guess the Treasurer will be pleased about that. The member for Werriwa would be well aware of that too because he worked in this industry in different ways over many years. The industry in Australia consists of more than 200 small, medium and large companies. Exploration spending for oil and gas exceeded $2 billion in 2006-07. In mid-2007 there were 220 active exploration permits, 49 retention leases, 65 production licences and 52 pipeline licences in Australian government waters.

Australia is very well endowed with gas, with 110 years of gas reserves at the current production rate, according to the International Energy Agency. Australia is expected to become the third largest exporter of LNG in the world within the next decade. The big challenge, however, is to find major new oilfields. I think some of us in the chamber at the moment would be well aware of that; I know the member for Kalgoorlie certainly would be. The Minister for Resources and Energy, Martin Ferguson, is currently discussing with the industry possible responses to this challenge. I know he is very keen to do whatever is possible to make sure we are out there doing what we can to find these oilfields. For more than 30 years Australia’s main oil-producing area was Bass Strait, off the Victorian coast. We do have a little gas off the Tasmanian coast and we have infrastructure running down the middle of Tasmania and to the north-west coast, so maybe sometime, with the infrastructure in place, some of that gas might be able to be brought ashore. Of course, we have lots of hydro energy in Tasmania, and there are a couple of companies drilling holes looking for hot rocks as well. Hopefully, they will be successful and the diversification of energy use for Tasmania will be increased. Then we could sell some into the eastern grid, now that we have the big cable between Tasmania, at George Town, and the Victorian coast, which is of great advantage to the state of Tasmania.

Oil and gas have been found in commercial quantities in the Carnarvon Basin, off the coast of Western Australia, which now supports Australia’s principal oil and gas producing region, accounting for 63 per cent of total Australian production. In 2006-07, 67 per cent of Australia’s oil production and 67 per cent of our gas production came from the Carnarvon Basin, while 18 per cent of oil production and 19 per cent of gas production came from Bass Strait. Total production of crude oil and concentrate in 2006-07 was 28,844 million litres or 504,000 barrels per day, while total production of natural gas was 39.4 billion cubic metres. Australia is underexplored by world standards, and most undiscovered petroleum resources are thought to exist in the frontier offshore areas. It is harder to get out there, and it is costly, but it is important that we are out there endeavouring to find those resources. There are currently 11 development projects worth more than $20 billion in total being constructed. One development project, worth more than $2 billion, has been committed to and more than $58 billion worth of projects are under consideration.

According to the Australian Petroleum Production and Exploration Association, development of the industry in line with the association’s vision to 2017 could deliver the following benefits for Australia: a quantum improvement in Australia’s balance of trade—an extra $20 billion a year by 2017; lower greenhouse gas emissions, with 180 million tonnes per year of carbon dioxide equivalent avoided globally; general energy security; a more skilled workforce, with up to 52,000 new jobs at the peak of expansion; increased regional development, particularly in Western Australia, Queensland and the Northern Territory—the northern parts of our great nation; reduced water usage in electricity generation—people understand that water is becoming more valuable and are using it in different ways, and pricing it is becoming a reality; development of Australia as a leading gas research centre; and increased revenues to government, which the Treasurer would be very pleased to have.

Looking at Australia’s national energy security, we have only about eight years of known oil reserves remaining at today’s consumption rates, presuming we are going to continue to use oil at the same rate that we do. There are a lot of interesting opportunities emerging through hydrogen technologies which could drive other transport modes, so that will play a part in it, but I am sure the great gas reserves we have in this country will play a very interesting and important part in all that as well. We have a greatly skilled workforce which needs to continue and we need to help it expand, so that is another challenge for us. We have very good management skills in coordinating and making some of these things happen, and we need to make sure that remains so. I think the state governments need to encourage exploration for new oil wells and do everything they can to make sure that happens, and as a nation we need to endeavour to make sure that that comes together.

Australia is looking down the barrel of a $27 billion trade deficit in oil and concentrate by 2015 if we do not find new oil reserves. This is why we have to open up more oil frontiers—make sure that we are out there looking for and finding these reserves—and why we have to continue to develop the potential of those alternative fuels, as I mentioned. There are a lot of great opportunities in that area and we should not let ourselves fall behind as a nation.

We have to make sure that what we do for the future of the car industry is along the right lines—lines that will take Australia in a new direction. We need to make sure that people are aware that there might be massive changes in how we use fuel and that the combustion engine may have to change. I was talking to somebody only the other day who said that, when petrol pumps came in the 1920s, it was a bit different to the technology we use now to fill up your car. I said, ‘Yes, it would be a bit different from chopping up the chaff and feeding the horse in the manger.’ We just have to make sure that people are aware that change is coming in many ways. I am keen to make sure that the public do not get the wrong perception. It would be difficult to have to turn around false perceptions, something I have seen happen in some industries. It serves no purpose at all.

I am very pleased to support this bill, and it is very good that it has been finalised. It will put in place the changes that are necessary and make sure that our nation moves forward.

Barry Haase (Kalgoorlie, Liberal Party, Shadow Parliamentary Secretary for Infrastructure, Roads and Transport) Share this | Link to this | Hansard source

I am very pleased to rise on this occasion to support this piece of government legislation, the Offshore Petroleum Amendment (Miscellaneous Measures) Bill 2008. The Senate committee recommended, as a result of submissions from Australian Petroleum Production and Exploration Association, that this legislation be voted up and that our petroleum industries take advantage of it. My research has shown that the federal government has provided well for the petroleum industry over the years in relation to exploration and production in Australia.

What I am far more concerned about is that it would appear the state governments are not keeping abreast of necessary changes to facilitate the petroleum industry. The member for Brand, who will be speaking shortly on this legislation, has a background that probably makes him more knowledgeable than most about this industry, and I will listen carefully to what he has to say in his opportunity to speak on this bill. The truth is that, even though this piece of legislation being proposed by the government will be an asset to the petroleum industry, and it follows on the heels of many things done by the Howard government to facilitate this industry, there is still a long way to go in changing the attitudes of state governments, especially in Western Australia, and in relation to those would-be petroleum processors with leases offshore from Western Australia.

We have in the past, for instance, done a great deal in the funding of Geoscience Australia to make sure that pre-exploration data is available to those corporates which would bid for leases at great expense and then drill out those leases exploring for a commodity that is highly valued today. Multiple millions of dollars are spent on the exploration of these leases that they apply for and win. If these international companies are fortunate and they find a resource, be it liquid or gaseous petroleum, that is when the hard work starts. The member for Brand well knows the hurdles that have to be jumped by these petroleum companies once they have found the needle in the haystack and, one would think, done all of the hard work. Their shareholders would say: ‘We have been immensely fortunate. We have been blessed with technical assistance from the federal government. We have been assisted by the federal government in the whole administrative process of finding and processing this petroleum product.’ They then find there is a hurdle called state governments. There is the hurdle of an environmental impact study. It exists at a state level. It exists at a federal level. Of course, a case in point is the recently proven up resources of the Browse Basin, offshore from West Kimberley in my electorate.

A particular company, Inpex—an outstanding Japanese company—have for years now been pouring millions of dollars into the process of getting some progress towards production. They worked through the state environmental impact studies and applied again and again, having been brought back to the table to address yet one more issue, one more fine detail in satisfying the environmentalists. They then had to come to the federal government and go through the process again.

Many members would be surprised to learn that, as difficult as this process is in its laid-down formal structure, like a bolt from the blue comes a further imposition from the new federal government. There will be not just the formal process of abiding by the requirements of the environmental impact studies at state and federal level; we have now had a decision taken by this government that says: ‘All bets are off. The formal details that we wanted you to attend to, the hurdles we wanted you to jump, the game, are all changed. We are now going to carry out a survey of the Kimberley coastline to establish what the situation is there generally and, instead of being able to apply for a particular location to establish an LNG production plant to process your Browse Basin gas, we are now going to tell you where a suitable site might be for a multiuser piece of infrastructure. We will tell you where that will be. Implied is that you will wait cap in hand for your shot at some production from this facility and you will take your orders from a higher authority.’ This ignores the fact, of course, that multimillions of dollars have been invested by shareholders. It ignores the fact that finding that resource in the first place was an expensive process and involved a great deal of technology and good luck. We are now expected to believe that these companies are simply going to persevere, address the new hurdles that are set up and be sufficiently tenacious to eventually get this investment to pay some dividends.

I put it to you, Deputy Speaker Andrews, that tenacity is a wonderful thing but life is hard enough. We ought not be making things unnaturally difficult. I am wondering just why it is that this new government is creating such an apparent impasse for this company to develop a resource that, when it is productive, will improve our balance of trade and will give greater revenue flows, with tax implications. It certainly would have given in its original proposition form opportunities for Indigenous people of the Kimberley to actually have a future, to have an opportunity, as we all have, to hold down a job for remuneration and to have a quality of life, to have self-esteem—to have all those opportunities that flow from having a job and not be dependent on welfare. Without this latest decision from the federal government to search for a suitable location that will be acceptable to the multiple levels of public opinion, it would have been the case that various companies—Chevron, Inpex, BP, Woodside—would have applied for and constructed individual gas processing facilities around the Kimberley coast, making pacts with Indigenous Australians in exchange for jobs for production, for a future in exchange for access.

I applaud that opportunity for companies to make investment in Australia. I think making an investment in Australia is good for Australians. It is especially good in remote areas of Australia because it gives for the first time an opportunity for employment for Indigenous Australians. We take for granted our opportunities to have jobs. We take for granted the opportunity to have a life that is sustained by our personal efforts. Indigenous Australians in remote areas have, in the main, never had a shot at this. But the government has come along now and said, ‘No, rather than a multiple of soft footprints on the environment distributed over a large area of country where many separate groups will have the opportunity for a job, we have got this focus to find just one location.’

I mused as to why. The best solution I can come up with is that this is some bid to address promises that were made pre-election in exchange for swapping vote preferences with the Greens—a very substantial group in the Kimberley. The fact is that there is a perception in the Kimberley that any development ought to be banned. I might add this is a view that is held by people who, in the main, enjoy a wonderful life. Many of us in this place are passionate about our own backyard. I believe most people who live in the Kimberley—especially in the coastal area—have got it right: that is heaven; everywhere else is somewhere down the line. But it galls me to see people comfortable in their environment—a man-made environment, an environment served with all of the utilities and the accoutrements of modern life—say: `No. We have got this. We wish now to passionately guard that and jealously prevent anyone else from enjoying it.’ Broome as it is today, for instance, has all of its amenity, all of its vibrant international tourist activity, but why do the people who are resident there wish to deny others in other parts of the Kimberley the same shot? It confuses me, quite frankly. I think it is short-sighted. I think it implies the ‘I’m all right, Jack’ system and I do not quite understand it.

Indigenous Australians need a shot at life. The Kimberley is a very vast and, yes, I agree, pristine environment in the main. But I would urge all of those who are so passionately opposed to giving Indigenous people a shot at life to wander some 800 kilometres down the coast and have a look at the development of Woodside. Woodside have a very extensive operation located on the Burra Peninsula. If you are more than about 15 minutes flying time away from that site you cannot see it. The absolutely huge development that is there, comparatively speaking, is invisible if you are more than about 15 minutes flying time away. It is about the size of a fly dirt on a football field if you consider its impact on the Pilbara, and a similar situation would exist if various spots around the Kimberley coast were developed to service the Browse Basin.

The argument that one very large piece of multiuser infrastructure will somehow have a softer footstep than a number of small, well-contained, well-regulated production facilities around the Kimberley coast, I believe, is a nonsense. Furthermore, as I have said, it will prevent the greatest number of Indigenous Australians from being involved in employment opportunities. But, more importantly, the investors in those corporations, who have made an investment not for some philanthropic ideal but actually to make a profit—I think we will all agree profit is not a dirty word; it makes the world go around—need security of investment. For security of investment, the particular corporation needs to have security of sales based on guarantee of supply

So the potential purchasers of the INPEX product, for instance, will want to know that supply can be guaranteed. And INPEX, in their wisdom—and they are not mugs, believe me—accept readily that, if they have a stand-alone facility that they have built to their specifications, it will have an IR strategy that is to their specifications, the product will have a specification that meets the needs of their clients, cash will flow in exchange for the flow of product and the investors will have a guaranteed secure situation. If you have the outside influence of this ratbag attitude from the federal government of casting about for some alternative supply base, where corporates stand in line for their shot at production and consequently their customers stand in line waiting for the delivery of the product that they have guaranteed to take, if it comes, then that is not a secure situation.

There is little to say in favour of a single multiuser infrastructure. We have experience from around the globe of industrial areas set up on a particular commodity, and we have the knowledge of that environmental experience. Why do people refuse to look at history when planning for the future? Look at Birmingham; look at Newcastle; look at some of the great blights behind the Iron Curtain where industrial areas have destroyed the environment: how could you argue that one great, large blob will have less impact on the environment than small-footprint, well-regulated environments? It is beyond me.

This piece of legislation is necessary because it quite rightly shows our concern for making the situation better for those corporations that are prepared to invest in leases, invest in exploration and then invest in the development of those areas. By the way, this INPEX investment is proposed to be somewhere in the area of $20 billion. How would you like to start raising $20 billion of capital in Australia today? It would be almost impossible, I believe. We have a situation where companies are prepared to make the investment to bring these valuable resources on stream, and then they are bludgeoned with further bureaucratic hurdles, as I have said, designed only to appease some previous political deal whereby the votes of the Greens were required. It will not do them any good, but that was the plan, pre-election.

I am not going to say any more on this bill. I have had the opportunity, and I appreciate that opportunity, to air some of the other problems suffered by the industry and I thank the House for that opportunity. But before resuming my seat I will make one final point: corporates make a huge investment in this nation in exchange for a product that is surely highly valuable. But they need, to a degree, to be unfettered by unnecessary bureaucracy. Yet a great hurdle has now been imposed at a state level. That is in addition to the apparent confusion that exists in the state as to how to deal with these internationals and what their priorities are. We now have the Western Australian government saying: ‘You’ve found this resource, on the open market, in competitive bidding and with the investment of millions of dollars. But, now that you have found it, we’re going to assume almost a state controlled situation, and we want you to guarantee that you will hold back 15 per cent of the product and sell it into the domestic market of Western Australia.’ I say: that is fine, but let it be a commercial deal that gives a return to the investor. I do not mind Western Australians having a guaranteed supply of energy. But let it be on commercial terms and let it not be to the detriment of investors—investors without whom we would have no petroleum industry in this nation and we would have a huge variation in our balance of trade. Investors are very important. Profit is not a dirty word, and states should either get up to speed on the game or step out of the way of industrial development of this fine nation.

Gary Gray (Brand, Australian Labor Party, Parliamentary Secretary for Regional Development and Northern Australia) Share this | Link to this | Hansard source

It is wonderful to hear the member for Kalgoorlie speak in such an insightful way about an industry sector of which he knows so much because of the location of offshore oil and gas resources in Western Australia. It is wonderful also to note the great bipartisan spirit that this place has shown over the course of the last 35 years in creating the legislative underpinnings that have allowed our great natural resource, the petroleum hydrocarbon sector, to grow a great footprint both in Bass Strait and off the North West Shelf of Western Australia. The North West Shelf of Western Australia is an area in which the member for Kalgoorlie and I both have an interest—from his point of view because the people who work there live there and they are the communities that he represents, but from my point of view I have to disclose an interest: I worked for Woodside Energy, the operator of the North West Shelf, from January 2001.

The work done in the North West Shelf by Woodside and its five joint venture partners is of the international class that the member for Kalgoorlie describes and is something that all Australians should be proud of. In being proud of the work done by these companies we should also note the significant work done by the former government and by Ian Macfarlane in particular, a minister for whom I had great personal regard for his diligence, his thoughtfulness and his incredible energy, even at times of great personal cost. He was always prepared to support the industry and to go wherever the industry needed him to be to support both our marketing and technical needs. Now I am a member of parliament and I speak on this bill, the Offshore Petroleum Amendment (Miscellaneous Measures) Bill 2008, which is an attempt to modernise and upgrade the petroleum offshore legislative framework that applies in so many areas of offshore activity.

One area that it is important to upgrade is, as we have had two speakers mention, the geodetic data upgrade. It is significant. It is about properly locating where on the face of the earth a particular incident or event is happening. In the hydrocarbons sector, this is particularly important in determining boundaries for leases. Hydrocarbons do not respect the boundaries that are drawn by mankind or by bureaucrats or by any entity other than Mother Nature. Oil and gas reserves reside below the seabed and in locations that are yet to be discovered by explorers. Explorers explore areas and leases that have been granted to them by governments under a competitive bidding process. An explorer will bid to explore a certain amount of drilling of wells, a certain amount of seismic data and other data to assess whether or not they wish to do work in a particular block. When a discovery takes place it is not uncommon for the hydrocarbon reserve to extend beyond the boundaries of the block, of the lease. Therefore, knowing exactly where that boundary lies is critical to determining the ownership of the hydrocarbons below the surface of the earth. And that is important because of the value of those hydrocarbons, the cost of recovery of those hydrocarbons and, most importantly, the timing of the recovery of those hydrocarbons, which is an issue that I will return to later in this speech.

Knowing where you are is critical to knowing where you drill; where you drill is critical to the discovery of hydrocarbons; the discovery of hydrocarbons is critical to the production of hydrocarbons; and then, ultimately, the sharing of hydrocarbons that span leases is a matter for another commercial discussion between resource owners—all of which is critical for establishing property rights, which is the central ingredient to driving the exploration and exploitation of any resource, not least of which, in this case, is hydrocarbons. In some international jurisdictions, particularly in Africa, and wherever international boundaries occur, this issue of knowing exactly where you are on the surface of the earth is of such importance that it engages governments. It engages massive diplomatic activity to determine exactly whether or not an oil or gas reserve belongs to this country or that country. Updating and modernising how we go about plotting where we are on the surface of the earth is critical to establishing certainty for hydrocarbons explorers. I congratulate the former government for the work that it did in this area, and of course I support the bill.

The member for Kalgoorlie has mentioned at great length the work that is currently being initiated by the federal government to carry out a Kimberley coast study and, indeed, an integrated environmental study of the whole of the Kimberley region. Although it is worth commenting that his observations about the LNG production facility currently in place on the Burrup Peninsula are quite accurate, it is also worth noting the size and scale of the investment required to drain the fields through the Browse Basin by the global companies involved—BP, Shell and INPEX, a Japanese company. Further around the Western Australian coast at Gorgon you have Exxon Mobil at play. They are big global companies with massive global interests, and they prefer to move in jurisdictions where there is great certainty. There is no doubt about that because I have been up to the Kimberley and I have spoken to the local residents. There is no doubt that there is great concern about where an LNG plant might be located. For that reason, a considered approach to its location is thought to be best. It was not done for Green preferences. I certainly did not get Green preferences; they did not direct them to me. I was one of the few Labor candidates who did not get Green preferences directed to me, and I would think that in the previous election I would have been one of the candidates that the Greens most visibly and obviously associated with the hydrocarbon sector.

Why is it important to create certainty on the Kimberley coast? It is important because the size of the investment, as the member for Kalgoorlie says, is measured in the billions—probably $20 billion to $30 billion, maybe even more. What we know is that, over the life of these projects, which may run for 30, 40 or 50 years, the revenue stream to the Commonwealth is significant, often to the tune of $30 billion or $40 billion. But most importantly the land tenure is long term; the footprint is semi-permanent. The presence is significant and therefore the support of a local community is central to permission to be there, to operate and to do the work that drains these oil and gas fields.

The oil and gas sector in Australia has a tremendous record of delivery, of safety and of being a clean industry, but it is an industry that is also massively challenged by cost. We currently see oil priced at over $100 a barrel. One of the great fears that the sector has is that it might take oil to be priced at $80 or $90 a barrel in order to fund some of the capital works that are required for these major projects to be brought on stream. That is what makes a single footprint in the Kimberley even more important. The costs of construction in Australia are high by international standards. In the north of Australia they are high by Australian standards, and through the Kimberley they are higher even than those. So managing those costs in an environment where the community is welcoming industry is critically important. A single footprint is also something which industry likes since it allows not just co-location of supporting industries but an open access regime on a particular production footprint. That means—and there are several examples of it around the world in Trinidad and Egypt—a large piece of infrastructure can be created and then, on an understood and transparent tolling process, a market is created whereby other gas or resource owners can bring their gas into that production facility at an understood price and in an understood way, thus reducing the capital cost of draining oil and gas fields, improving the return of the expensive capital equipment required and reducing the size of the footprint and its physical impact on the environment.

This bill goes to creating certainty for the offshore exploration and production sector. Petroleum production in Australia is a significant contributor to GDP. In the last year it contributed in the order of $25 billion: direct taxes raised as a consequence of the operations of the hydrocarbon sector were in the order of $8 billion, exports from the hydrocarbon sector were in the order of $16 billion—but imports of hydrocarbons were in the order of $22 billion. So we are now facing, for the first time, a widening gap in our ability as a nation to provide our own hydrocarbons for our own domestic consumption. This trade imbalance has significant impacts for our industry, for our balance of payments and also for the cost of living in Australia. We need to be able to trade to make our way, and we need all sectors of the Australian economy working at full pace to ensure that we can trade as efficiently and effectively as we can.

By creating certainty in offshore exploration and by encouraging offshore exploration, we are hoping for more major discoveries—like a Gorgon, like an Ichthys, like the Carnarvon Basin—that will help drive not just a closing of that gap in liquids production but hopefully creating once again an export position so that our exports can continue to help pay our way. Declining oil production and declining hydrocarbons production in general in Australia have a very significant impact on our balance of payments and a very significant impact on our economy. That is why the member for Kalgoorlie’s introduction of the issue of draining the Browse fields or the Ichthys field and of the INPEX project and the Woodside operator projects out through that way is so critically important. It is possible for Australia to balance the gap in our hydrocarbons export-import imbalance through a massive increase in our production of liquefied natural gas.

Under the former government we saw the first steps to open the Timor Sea to LNG production. This was done through the conclusion of a treaty with the newly created nation of East Timor, and it was done through creating a framework for ConocoPhillips to have both certainty and encouragement to bring its gas onshore for the creation of the first gas LNG hub outside of the Burrup, which was done in Darwin.

At this stage in our history, we produce in the order of 20 million tonnes of LNG per annum. That is a significant performance, given that in 1996 our production was closer to 12 million or 13 million tonnes. But it is a long way short of where we need to be to close our import-export gap. In order to close that gap, we need to be moving to LNG export production in the order of 50 million to 60 million tonnes per year over the course of the next 10 to 15 years. To do that, we do need to drain the Gorgon field. To do that, we do need to drain the Browse Basin. To do that, we do need to give the industry the certainty that it requires to make the investments that we need as an exporting nation.

APPEA, the industry association, has a 10-year aspiration, along with its industry affiliates, to lift LNG capacity to that 50 million tonnes to 60 million tonnes a year. That is a magnificent aspiration to have. It accords with our national interest, and it accords with the needs of our nation. Critical to success in this area will be whether or not the operators of significant gas fields offshore are able to become sufficiently energised, organised, and inclined to ensure that their production does take place.

The member for Kalgoorlie has spoken of the possibility of INPEX taking their gas to Darwin. What he means by that is that, instead of building a production facility on the Kimberly Coast, INPEX may be inclined to build an extremely long pipeline to Darwin and take that gas into Darwin, where there is an existing facility operated by ConocoPhillips. This is not a bad idea. This is not lost production to Australia. The worst thing that can happen to Australian hydrocarbons, to our gas resources that lay beneath the surface of the sea—which at current rates of production have the capacity to sustain our nation for over 100 years—is for those resources not to be tapped. The worst thing that can happen is for those resources to stay in the ground and for us to fail to even try to meet the APIA aspiration of 50 million tonnes per annum by 2017.

It is important for us in this place to continue the bipartisan support that we have always enjoyed giving to the hydrocarbon sector for certainty in its exploration and certainty in its production. The bill that is before us today creates another step towards certainty for explorers. It creates that certainty through modernising our legislative framework and by accepting important modern trends both in technology and in how workers are organised. I commend the bill to the House.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I am pleased to speak in support of the amendments to the Offshore Petroleum Act in the Offshore Petroleum Amendment (Miscellaneous Measures) Bill 2008. The oil and gas industry is a significant part of the Australian economy, accounting for around 2.5 per cent of GDP, so, when it comes to amending the legislation that regulates this industry, it is important we get it right.

Oil and gas currently account for around 33 per cent and 21 per cent respectively of Australia’s primary energy consumption.

A division having been called in the House of Representatives—

The value of oil and gas produced in Australia in 2007-08 is estimated to be in excess of $27 billion, with exports valued at around $16 billion. Total production of crude oil and condensate in 2006-07 was 28,844 million litres or 504,000 barrels per day, while total production of natural gas was 39.4 billion cubic metres. The industry in Australia consists of more than 200 small, medium and large companies—obviously global companies—and employs about 15,000 people. It was reassuring to hear from the previous speaker, the member for Brand, of the APIA commitment to actually growing that industry.

This financial year the industry will pay about $3.6 billion in resource taxation to the Australian government. With more than 100 years of gas reserves and a glut of undiscovered petroleum reserves offshore, the industry has a very bright future in Australia—especially in a planet where energy resources are shrinking. In fact, the International Energy Agency believes Australia will become the third largest exporter of LNG in the world within the next decade.

The Offshore Petroleum Act was passed in March 2006 to bring the legislation into the 21st century. It effectively replaces the Petroleum (Submerged Lands) Act 1967—having been born in 1966 myself, I can see that things have changed a little bit in the last 42 years. The original act has been repeatedly amended and as a result it has become much too complex and cumbersome. It was therefore time that legislation for the administration of Australia’s offshore petroleum resources be revamped.

The new act replaces the old language, style and structure of the previous act with modern standards which will result in some savings in compliance cost to government and to industry. The user-friendly language of the act will ensure administrators in industry and government do not require a law degree to interpret the legislation. Not that I am knocking lawyers or their role in this sector or in court; I would be knocking myself. However, the act has not yet been proclaimed. I understand that the proclamation will not be made until the states and the Northern Territory make amendments to their mirror acts. These acts enable the state or Northern Territory minister to perform the functions as a member of the joint authority and as the designated authority under the Commonwealth Offshore Petroleum Act.

Northern Territory, Queensland and South Australia have made the necessary amendments to their mirror legislation, while New South Wales, Western Australia and Victoria can rely on the provisions of their interpretation acts. The Offshore Petroleum Act can therefore come into force following the enactment of the amendments currently before the House and the finalisation of the Tasmanian mirror legislation. I am sure the member beside me, the member for Braddon, will make sure that happens quickly! The timely passing of this bill will ensure no more delays in proclaiming the act.

These amendments are necessary to ensure that the regulatory regime continues to support the efficient exploration and development of our oil and gas reserves. This bill will make technical corrections to the act, ensuring that the provisions for the term of production licences operate the way that was originally intended. It will make certain that those production licences that were renewed for an indefinite duration at first renewal are preserved, but any subsequent renewals will only be granted for a 21-year term. Having worked in the resources sector, I am aware that, whilst sometimes people would want more than a 21-year term, 21 years is appropriate timing. It gives sufficient certainty to industry but also sufficient opportunity for government to have some influence.

The one policy change in this bill relates to the emergency power of the Commonwealth minister. This bill will repeal section 327 of the Offshore Petroleum Act, which relates to declarations of a state of emergency by the commonwealth Minister for Resources and Energy. Under the act, declarations of a state of emergency can be made when there is a likely threat of terrorist activity. However, since the minister has never had to make such a declaration and as this matter is better covered by the Maritime Transport and Offshore Facilities Security Act 2003, it is best removed from the act.

The act allows federal unions to serve as workforce representatives in an occupational health and safety scheme—something to be commended. This bill amends the definition of ‘workforce representative’ to allow transitionally registered associations recognised under the Workplace Relations Act 1996 to be appointed. The amendment ensures that all unions recognised under the Workplace Relations Act can be workforce representatives. Personally, I have seen good unions do great work when it comes to health and safety on work sites, so it is hoped that this positive role will continue. These provisions are unlikely to be affected by the government’s election commitments on industrial relations.

The bill also takes into account advances in global positioning technology. As I understand it, the bill subscribes to a more accurate mathematical model of the world, rather than the previous view as to where the centre of the world was. The centre of the world is not Tasmania, I would suggest to the member beside me, the member for Braddon.

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

Mr Ian Macfarlane interjecting

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

It might be near Toowoomba but a little bit away from it! This new model is known as a geodetic datum and, as clarified in the earlier speech made by the member for Brand, it really is about the up-to-date analysis of where something is. Obviously, when it comes to mining leases and exploration leases and drilling, we need to know exactly where we are. The GPS data ensures that that is much more accurate. The previous geodetic datum was designed for the mainland, and its centre was not the centre of the earth. New global positioning systems are more suited to a geocentric datum and this is reflected in the amendments.

Finally, I am advised that the petroleum industry and state and Northern Territory governments were thoroughly consulted during the drafting of this bill, and I commend the minister for this.

Question agreed to.

Bill read a second time.

Ordered that the bill be reported to the House without amendment.