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

The purpose of the Offshore Petroleum Amendment (Datum) Bill 2008 is to make a minor technical amendment to the datum provisions included in the Offshore Petroleum Act 2006. To my understanding and the understanding of the opposition, there is no policy change attached to this amendment. Although the advent of global positioning systems justifies the adoption of an international geocentric datum, the OPA still needs to refer to the AGD66 for the purposes of determining the position of graticular sections or blocks and refer to the GDA94 for certain other purposes, including description of coordinates of a point in the title. Madam Deputy Speaker, isn’t it lucky that I am the grandson of a geologist, a very good geologist?

If graticular sections or blocks are determined by reference to GDA94, as the amended Offshore Petroleum Act currently states, the grid used to determine the position of the titles will be moved approximately 200 metres in a north-easterly direction from a grid that refers to AGD66. This is not the policy intention and would cause concern and uncertainty for the petroleum industry if not corrected. Certainty is a fundamental component of the resource sector, as I noted in a speech in this place earlier this year. Without that certainty, we risk undermining one of the most critical contributions to our economy, a part of our economy that generates not only thousands of jobs but literally billions of dollars of exports. Of course, any industry that currently generates jobs is incredibly important to Australia—doubly so since the advent of the Rudd government and a new phenomenon in the 21st century: rising unemployment.

The resource industry in Australia, despite what is being done to it by the Rudd government, is an industry that is investing tens of billions of dollars to secure not only the future of Australia in terms of jobs and exports but also the future of this planet by ensuring that we produce a clean energy product—a product that can be used instead of coal in countries all over the world. In fact, the history of the petroleum and LNG industries in Australia shows that they are leading innovators in terms of the efficiency gains that they are making—for instance, in the North West Shelf between trains 1 and 2 and trains 3, 4 and 5. It also needs to be highlighted that LNG has greenhouse gas emissions with about half the life cycle of those of traditional fossil fuels; it also has very low levels of particulate and sulfur emissions. If the potential of the LNG industry in Australia were fully realised, it would save the globe around 200 million tonnes per annum, according to ABARE.

Whilst this amendment to the legislation is important with regard to giving the petroleum industry certainty in relation to the leases it holds, it is minute in comparison to the uncertainty that is currently being created by the Rudd Labor government, and I will speak of two areas. The first and most concerning area is the way in which the LNG industry in Australia will be treated under the proposals put forward by Senator Wong and the Prime Minister. In that green paper on reducing greenhouse gas emissions, the LNG industry—despite the fact, and almost in spite of the fact, that they have lowered their emissions in producing what, as I have just stated, is an incredibly friendlier fuel in terms of greenhouse gas emissions—have been caught by an arbitrary threshold that means, had they not made those gains in lowering greenhouse gas emissions in the production of LNG, they would be eligible for compensation. But, under the misguided plan that has been put forward by the Rudd government, that industry is going to be penalised for its good work and its efficiency and the greenhouse gases it has already saved.

There is no logic in what is being proposed under the green paper. It penalises those industries that have made savings, whether it is the LNG industry and the savings it has made, whether it is the cement industry and the savings it has made, whether it is the aluminium industry and the 40 per cent savings it has made or whether it is the ethane industry, which in producing plastics has made some enormous savings in emissions of some 40 per cent. The LNG industry—

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

I would draw the member for Groom back to the bill before us and ask him to—

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

I am talking about the LNG industry, Madam Deputy Speaker, and that is the petroleum industry, and the bill covers the petroleum industry.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

Yes, I know, but it is a fairly technical bill and I would really like you to put your remarks in the context of the bill before us.

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

Madam Deputy Speaker, of course I am happy to do that. The petroleum industry is, of course, an industry that needs to know exactly where it is both in a geophysical sense and also in a political sense. I will talk on both. This bill, which is a political instrument—that is, it comes through this parliament—will enable the industry to have a small amount of certainty that where it is drilling for oil and gas is actually where it is legally allowed to, within its own confines.

But, as I have said, we need to ensure that the industry has certainty on all fronts. You do not deliver the industry certainty by just making sure that the latest scientific technology in terms of global positioning ensures that these industries are in the right spot. You need to ensure that they have economic certainty, you need to ensure that they have legislative certainty and you need to ensure in fact that there is a suite of certainty, because this is an industry that has to invest billions and billions of dollars. In fact, in one project alone as much as $30 billion can be invested.

This bill is incredibly important—I do not understate that—but so too is the fact that, along with the uncertainty brought about by the proposed carbon trading scheme to be introduced by the Rudd Labor government, individual companies and groups of companies involved in the petroleum industry covered by this act are also being subjected to some incredible changes in the terms and conditions under which they operate in Australia. In operating in Australia, one thing that companies do want is certainty—and this bill gives some certainty. But they also want certainty when they do a deal with the government and negotiate the relationship between the government, the company and the royalties they pay. There needs to be certainty there.

Of course, we saw in the last budget an unbelievable act that will no doubt affect the sovereign risk and the certainty that these companies operate under, and that is the imposition of an extra $2.5 billion in tax on a group of companies that to date, according even to the department when they appeared before the Senate hearing in 2005, have received no benefit or exemption, in relative terms, in the current excise arrangements. That is, had they been taxed under the current arrangements, the petroleum resource rent tax, they would have in fact paid the same as they would have paid under this so-called concession. The Rudd Labor government now sees that as being too generous and is imposing an extra $2½ billion in taxes for no reason other than this government is a high-taxing, high-spending government.

Certainty is an incredibly important thing, and by doing that the Rudd government has destroyed a major chunk of certainty, far greater than the certainty that this bill creates. Important though this bill is, important though geophysical positioning is, a suite of certainties is required, and on a score of one to 10 the Rudd Labor government is running at about two, I reckon. There is not much more you can do to the resource industry in Australia at the moment except take away the certainty of their leaseholds, to completely destroy the confidence they have in investing in Australia.

Madam Deputy Speaker, I know you want me to be relevant to the bill, so I will move on to something that is very relevant to this bill—that is, what happens when someone is able to position themselves in an exact position, seek oil and gas and perhaps exploit that resource at a later date. There is no better example of that outcome than the North West Shelf for the enormous contribution it has made to Australia in the investment that has been made and the wealth it will bring to Australians, not only to those who work in that industry but, as I am sure the Rudd government understands, to mums and dads who own shares in the many companies that operate in that North West Shelf precinct.

By way of example, the latest train to be operated in that North West Shelf consortium is Train 5, and it was announced just the other day that it is moving into production. The fifth onshore LNG train is located with the other four on the North West Shelf, and I am sure the Minister for Resources and Energy has taken the opportunity to look over it, as I know he is an excellent Minister for Resources and Energy. His predecessor also took the opportunity to go there—perhaps not to my wife’s pleasure, because it was three days before Christmas, but I thought: ‘Hey, it’s the festive season. What better could you do than look at a fine example of Australian engineering!’

Martin Ferguson (Batman, Australian Labor Party, Minister for Resources and Energy) Share this | Link to this | Hansard source

I’ll make sure you get an invitation to the opening!

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

Thank you, Minister. It is worth noting, as I talk about the importance of this bill and the investments that it creates, that that fifth train project cost $2.6 billion. It makes the total investment in the North West Shelf worth $25 billion. It is the first LNG train of what we call a modular construction, and it also entailed a jetty extension and the securing of a second LNG loading berth. Two additional power generation units and a whole range of other equipment were put in place, including equipment that, on top of the efficiency gains that come from these latest gas compressors, will also see even less of an environmental footprint, particularly through acid gas removal units. During its construction, 83,000 cubic metres of earth were moved and 17,600 cubic metres of structural concrete and 32,200 cubic meters of paving were set. These projects are enormous. These and other resource projects right around Australia are projects that will underpin the future economic wealth of Australia.

This legislation does not involve a policy change and will see further expansion in the LNG industry. It is disturbing to me, as a previous resources minister and as someone who takes a very close interest in trade through their portfolio, to see the Browse project run by INPEX now being forced to consider going to Darwin because of the incompetence and ineptitude of the Carpenter government in Western Australia. That is a much more expensive prospect and an opportunity cost to Australia. I think this highlights the inability of the Carpenter government to provide any real recognition of the billions of dollars that foreign companies invest in Australia.

It would be nice if the only people who use this legislation were Australians, but that is not the reality. The reality is that foreign companies are investing in Australia, sharing their wealth with Australians and providing jobs for Australians. This legislation gives the industry some more certainty on that, but whilst we have a Carpenter government in Western Australia we will continue to have the sorts of conflicts that force the oil and gas industry to look to the Northern Territory for their LNG plants and, in doing so, rob Western Australians of jobs and income.

It is proposed that the amendments in schedule 1 of this bill be retrospective from 1 July 2008 to provide the following benefits for the industry: to remove uncertainty about title boundaries for petroleum titles, to ensure alignment between existing and future titles and to facilitate the award of new exploration permits and the release of new exploration acreage. There are no adverse effects for the industry due to this retrospectivity and the bill does not impose any new regulatory burden on the petroleum industry. I commend this bill to the House. I hope this small act of certainty will provide some reassurance to an industry whose confidence has been shattered by the Rudd Labor government.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

Member for Groom and member for Mallee, it is not my requirement that you be relevant to the bill; it is a requirement of the standing orders.

Richard Marles (Corio, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Offshore Petroleum Amendment (Datum) Bill 2008, which seeks to amend the Offshore Petroleum Act 2006. I listened to the honourable member for Groom make his arguments in relation to this bill. He raised the principle of certainty as being the guiding mantra for this debate, which is appropriate because this is ultimately about providing greater certainty. I make the observation in terms of certainty that, if our country were to have to rely on the policies of the opposition when it comes to the great challenge of climate change, which he referred to, this country would be in a sorry state indeed. What we see on the part of the opposition is really the Wheel of Fortune method of political management: every day they spin the wheel and a different policy comes up. There is absolutely no consistency on their side in terms of how we deal with the challenges of climate change, which provides absolutely no certainty to either the LNG industry or any other industry.

I am going to attempt to explain what this bill does. It is a very technical bill. It corrects a technical oversight which occurred in the Offshore Petroleum Amendment (Miscellaneous Measures) Act 2008, which came into force on 1 July 2008. That act replaced Australian Geodetic Datum with Geocentric Datum of Australia. Datum is a mathematical surface on which we map and have a coordinates system. It is the basis on which we engage in surveying—and, in this context, surveying offshore petroleum titles. Australian Geodetic Datum, which has been the traditional means by which we have undertaken that mapping and surveying, is based on the surface of the earth within the Australian region. By definition it is an approximation, but it is a very accurate approximation. It has served us well and it does provide precise boundaries for petroleum lease titles within Australian waters.

Geocentric Datum of Australia is a method of surveying, as the name suggests, based upon the centre of the earth. It is able to be done because of the advent of global positioning systems. Consequently, it is a system of surveying which will give a set of coordinates that are consistent globally. There is therefore good reason to start using it in many of the ways in which we survey and operate in Australia. It is a useful means of, for example, determining points, lines and areas which exist within petroleum titles. Describing a precise set of coordinates, for example, within a title is best done in a way which can be consistently viewed around the world through the Geocentric Datum of Australia.

The problem is this: if we apply that method to the graticular sections and blocks which are the basis for the boundaries of petroleum titles then, because it is based on the centre of the earth rather than the earth’s surface, it will have the consequence of shifting the grid upon which the boundaries of these titles are determined by about 200 metres in a north-easterly direction. That obviously will then give rise to a great deal of uncertainty in relation to titles which currently exist. Not only will it create uncertainty there but, in terms of issuing new titles into the future, how they sit adjacent to existing titles will also be confusing. For that reason—and because the original Geodetic Datum does provide an accurate means by which we can provide boundaries within our waters—this bill proposes that we retain the new Geocentric Datum of Australia as a method for surveying—for many of the reasons we do that within the act—but, when it comes to the establishment of boundaries in petroleum leases and, in particular, the points of graticular sections and blocks which are the cornerstones of those boundaries, that we go back to the original Australian Geodetic Datum. That means that the current positioning of the leases will remain unchanged and that future leases granted under that scheme will be compatible with them.

A simple way of putting this is that it makes sense not to change horses as you are crossing a stream. While there is a new method here which can be applied to different circumstances, given that we already have one rider on this horse we ought to stick with them so that we can have consistency between what has been done in the past and what happens in the future. This bill proposes that this be done retrospectively from 1 July, which will give continuity of title. As I said, in doing that we remove uncertainty around the existing boundaries of petroleum titles, but we also ensure that there is alignment and compatibility with future titles that are granted.

It is important that this goes through the parliament relatively quickly because, until we rectify this issue, we are in a position where we have to suspend the release of new exploration areas. There was an auction process by which new exploration areas were available for bidding. That bidding closed on 18 April this year. In order for the successful bidders in that process to take over their new leases, this bill needs to pass. So it is important that it goes through parliament quickly. Indeed, for those areas where there were no bids, it is intended to rerelease them and go through another auction process. Again, in order to do that—and the current schedule is to do that next month—this bill needs to go through parliament so that we can rectify that situation. It is a technical amendment, but it is clearly an important amendment. As the member for Groom said, it is an amendment which is ultimately very much about certainty.

I think that talking about this and the foundations of the way in which we establish petroleum leases in our offshore petroleum and gas fields affords the opportunity to explain to the Main Committee and the House how significant the industry which is founded upon those leases is to the Australian economy. Currently Australia refines about 75 per cent of its petroleum products. We import the remaining 25 per cent—principally from Singapore. Seventy-five per cent of the petroleum products in this country are refined in the seven refineries which exist around Australia—one of which, the Shell refinery, is in my electorate of Corio—and that does provide the bulk of our product.

About 70 per cent of the crude oil which goes into those refineries is imported from a range of countries. There is a good reason for diversifying the supply that comes into this country so that we are not beholden in a sense to one source. Interestingly, the largest amount that we import actually comes from Vietnam. Of the 30 per cent of the crude oil that we refine in Australia, 90 per cent comes from offshore petroleum reserves, which are based on the very leases that we are talking about in this legislation. Ninety per cent of the oil and gas reserves that we have in this country, which we use, comes from offshore deposits, so it is a very important part of our petroleum industry.

There is now a real need to engage in the further exploration of gas reserves and, ultimately, oil reserves in this country. Having a secure system by which we do that is similarly important. Recent commercial decisions have really underestimated or not anticipated the extent of the commodities boom in Australia which means the demand for gas has given rise to a very tight gas market, particularly in Western Australia where, of course, the Varanus Island incident has further complicated issues. But that has to be seen in the context that Australia actually has very abundant offshore gas reserves.

It is anticipated that, at the current rate of consumption of our gas reserves, we have something like 110 years worth of supply. So we have an interesting situation where we have significant gas supplies but a very tight domestic market. In addition to that, there is real potential for a significant increase in the LNG export industry in Australia.

What that necessarily implies is that we have to open up areas for gas exploitation to occur in Australia. We have to open up these new reserves. Following recommendations of the Joint Working Group on Natural Gas Supply, the minister’s department is reviewing the government’s retention lease policy and going through a process of consultation with stakeholders which may well ultimately review the way in which we manage our retention leases.

Retention leases are a low-cost form of tenure that is held by exploration companies over gas deposits which are not commercially viable at the moment but which are anticipated to be commercially viable at some point. Retention leases, which are very much based on the surveying methods that I have described, become very important in terms of mapping the future potential of gas exploration in this country. If we need to open up gas reserves—and we absolutely do—it is important that we look at the way in which these retention leases are managed.

Again, the Department of Resources, Energy and Tourism is reviewing the commerciality of a number of existing retention leases to assess their viability in the current climate. One would think that the current climate will actually mean that, in the tight market that I have described in WA and the rest of Australia, it is more commercially viable to start opening up these enormous reserves. So that is a very important step that we need to take in dealing with our gas reserves.

In saying that, I think the other point that needs to be noted is the very significant cost of developing a new LNG project. Typically, it is in the order of $20 billion, and often these projects do not start to return a profit for something in the order of seven to 10 years. That said, it has been estimated by the Australian Petroleum Production and Exploration Association that:

Australia’s vast gas reserves mean that we have the capacity not only to assist our own nation move to a much less greenhouse polluting future but to triple LNG exports to 60 million tonnes over the next 10 years.

The association goes on to say that if we could do that it would result in a reduction of 120 million tonnes of greenhouse gas pollution in the Asia-Pacific region—that is, of course, on the basis that LNG is a far more greenhouse friendly fossil fuel than other fossil fuels; it would generate an additional $10 billion per year of tax revenue; it would improve Australia’s balance of trade to the tune of $20 billion per year; and it would create many thousands of jobs. So it is a very important industry indeed and needs to be developed.

Offshore oil is an area that also needs developing. Currently it is anticipated that on the basis of existing consumption rates we have about eight years of known oil reserves remaining. If we do not open up new oil reserves, Australia is looking down the barrel of a $27 billion trade deficit in oil condensate by 2015, which, of course, is why it is so important that we move down that path. What all of this describes is a very significant industry but also a market which has become tight domestically and one where there is an increasing need to explore and develop new offshore oil and gas reserves. To do that, we need the kind of certainty in our surveying methods and in the granting of our leases which this bill will provide.

In assessing the significance of the offshore oil and gas industry to the Australian economy, I want to make the following points. Currently the offshore oil industry accounts for 33 per cent and gas accounts for 21 per cent of Australia’s primary energy consumption. The oil and gas industry amounts to something like 2.5 per cent of Australia’s gross domestic product. The value of oil and gas produced in Australia in the financial year 2007-08 was estimated to be in excess of $27 billion, of which $21 billion was export. The industry employs around 15,000 people and pays $2.6 billion in taxation revenue to the Australian government. The industry consists of over 200 small, medium and large companies. Exploration spending for oil and gas in the financial year 2006-07 exceeded $2.2 billion and, as we stand here in 2008, there are 220 active exploration permits, 49 retention leases, which I explained earlier, 70 production licences and 52 pipeline licences in Australian waters.

So there is a very significant investment in this area. Offshore oil and gas production is absolutely vital to the efficient running of Australia’s economy. It is clear that in order to allow this industry to grow and to open up more oil and gas reserves, which we so desperately need it to do, there needs to be a solid foundation upon which that is done, and there is nothing more fundamental to that than ensuring that the boundaries of the leases that are given to these companies to explore and ultimately exploit their reserves are completely certain and completely secure. Ultimately, that is what this bill seeks to do, so I very much commend it to the Committee and to the House.

Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

As has been indicated by previous speakers, the Offshore Petroleum Amendment (Datum) Bill 2008 is largely a technical amendment bill. I will not say a minor technical amendment, because it does actually have a significant impact on the way we let and record our offshore leases. The purpose of the bill is to make a technical amendment to the datum provisions included in the Offshore Petroleum Act 2006. It is not a policy change; it is, as has been previously indicated, a change in the way we record survey results in allocating leases in this country. The bill will correct an error resulting from a technical oversight in the Offshore Petroleum Amendment (Miscellaneous Measures) Act 2008 which inadvertently replaced all references to the Australian geodetic datum, AGD66, with the geocentric datum of Australia, AGD94. The amendments in the Offshore Petroleum Amendment (Miscellaneous Measures) Act commenced on 1 July this year.

The ‘datum’ is the way that the mathematical survey results are coordinated with the description or the title in question. The Australian geodetic datum, the AGD66, was based on the mathematical surface of the earth which was designed to fit the Australian region. Whilst this has been a good datum for local use, its origins are approximately 200 metres offset from the earth’s centre of mass. That was not an issue when we surveyed using precisely that as the reference point for issuing our leases. However, with the advent of global positioning systems, GPS, the international standard, as I understand it, is now looking at the geocentric, or the earth’s centre in terms of establishing datum points, which is the basis of the geocentric datum of Australia, the AGD94. Whilst we can actually still use that, all of our leases are calculated on the basis of the AGD66, and that is how it is divided up into contestable areas for offshore oil and gas exploration.

Under the recently repealed Petroleum (Submerged Lands) Act 1967, the graticular sections and blocks—which I understand are sections of about one minute latitude against one minute longitude—are based on and determined against the older reference, which is the AGD66. To provide certainty to the petroleum titleholders and to ensure that boundaries are not changed, what we need to do is to readmit those older survey coordinates, the AGD66, into the new act. The more accurate GPS, which is increasingly used for surveying and navigation, will also be expressed in the act, but in the allocating of titles it is to revert back to AGD66.

As I say, this is a technical bill to an extent, but it has huge ramifications. Not all that long ago I had the opportunity to revisit the North West Shelf. I used to spend a lot of time working at the North West Shelf and the Timor Sea. I know a fair bit about the competition for our offshore leases and I also know how desperate we were to find oil, particularly in the Timor Sea, to replace Bass Strait. Regrettably at that stage, and I am going back a number of years, every time we drilled for oil we found gas and for a period of time we capped a number of our wells—in fact, many of them still remain capped—as we had to move to extend our markets. We established our markets particularly from the Woodside finds, from the Rankin A platform. We certainly managed to sell a considerable amount of gas to China, Japan and now to South Korea.

This country, despite what the pundits might have you believe, is an energy rich nation. It is just that some of our resources are a little hard to obtain. At the moment on our current consumption rates we have about 110 years supply of natural gas. That includes what we are sending offshore to China, Japan and South Korea and our existing domestic market. I have a few more figures. At this stage we have about 800 years supply of brown coal and 350 years supply of black coal. I understand that there are always going to be some issues about the burning of fossil fuels, and that is why this country must become a leader in establishing clean technologies for the production of sources of energy. But we have an abundant supply of gas, and one of the things I have constantly indicated to the minister is that this country, with its abundant supply of gas, must start to work on policy that moves in the direction of gas to liquids. This is an important part of our future development and will certainly be important for future Australian industries and also the domestic market. To that extent, whilst we do have 110 years known supply of gas reserves, it is important to us to extend that industry. We need to find more gas in order to facilitate that future.

Unfortunately, when we talk about oil, our oil reserves are estimated to be depleted within the next eight years. That will have a significant and deleterious effect on our economy unless we find a suitable replacement for those stocks. With the depletion of the Bass Strait oil, our main oil production is now in Western Australia, but those reserves are old and rapidly diminishing. It is important that we encourage further exploration in order to find further oil and gas supplies for this country. Hence, although this bill makes a minor amendment to the act, it is quite central to allocating the leases to allow bodies to develop, prospect and explore in those new areas.

Mr Deputy Speaker, I have spoken just briefly about the importance of the bill in that respect, but one thing I probably should leave you with is that, whilst at the moment we have known gas reserves in this country—around 110 years supply—it has been estimated by the International Energy Agency that Australia will become the third largest exporter of LNG within the next decade. Obviously, in that calculation they are factoring in an approximation of further discoveries of gas in this country. I understand from talking to many of the players in the industry that they are relatively confident that the gas is out there. They are looking at various business models that allow them the opportunity to invest in further gas exploration, and this is something the International Energy Agency has already made some judgements on. Within the parameters of the territorial base of this country, within the next decade it is likely that we will emerge as the third largest exporter of LNG.

If we are going to be supplying gas to the world, from my perspective it is also vitally important that we develop the domestic market for gas. Hence, I am an ardent advocate for the development of our gas to liquids and the creation of synthetic diesel through our gas supply. I think that, probably more than most other energy sources, that is likely to be the backbone of the future of this country. Whilst the resources of this country will be many and varied and we will require a suite of responses to accommodate our future energy needs, I believe that the development of gas to liquids as well as coal to liquids is going to play a very significant role in the future energy needs of this country. On that basis, I commend this bill to the House.

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

The purpose of the Offshore Petroleum Amendment (Datum) Bill 2008 is to make a minor technical amendment to the datum provisions included in the Offshore Petroleum Act 2006. The amendments in schedule 1 of this bill have retrospective effect from 1 July 2008 to provide benefits to industry, including the removal of uncertainty about title boundaries for petroleum titles, ensuring alignment between existing and future titles, and facilitating the award of new exploration permits and the release of new exploration acreage. There will be no adverse effects on industry due to the retrospectivity.

Drilling or digging for oil has occurred in one way or another for hundreds of years. The Chinese, for instance, invented a bamboo rig to obtain oil and gas for lighting and cooking. But only in the last 40 to 50 years has humanity been able to efficiently extract petroleum from beneath the seas, an achievement that I believe ranks with the 20th century’s mightiest technological triumphs.

I had the honour of representing workers in the offshore oil and gas industry in my previous occupation and I got to know many of them very well. It is a very hard and difficult job working in the offshore industry. I found the helicopter rides hard enough! In particular, I would like to acknowledge the contributions of a number of proud offshore workers who I had the pleasure of working with: John Clarence, who spent 30 years as a caterer in Bass Strait; Tony McDonald, who has spent 30 years as an Esso operator and is on Kingfish A at the moment—indeed, as I talk to the Committee; Colin Fisher, who worked as a caterer for 25 years on Western Australian drilling rigs; Dale Bond, who has spent 20-plus years with Esso, is a health and safety representative working right across the fields and is currently at Kingfish West; Paul Flood, who has worked with Schlumberger in Bass Strait for 10 years; Bruce Pendlebury Nabors, who spent 10 years as a driller; Ross Ritter, who worked for 20 years as an electrician with Esso; Vinnie Heaton-Harris, who worked for 15 years at Esso offshore; Scott Mckenzie, who is currently at Cossack Pioneer Woodside and has worked in the industry for the last 12 years; and Damien Beaumont, who has spent the last five years drilling in Western Australia. The list of people who work in this fine industry is almost infinite.

According to the Australian Petroleum Production and Exploration Association, or APPEA, over 15,000 people are employed directly in the Australian petroleum industry, from rig tender workers, divers and seismic vessel workers to workers on mobile offshore drilling units, pipe-laying vessels, construction vessels and floating production and storage off-take facilities. It is also estimated that more than 30,000 additional jobs are created in this most important industry through suppliers and contracting and support companies.

Given that the offshore petroleum industry accounts for about 90 per cent of the total Australian industry in this field, producing nearly 30,000 megalitres in 2006-07, the offshore industry would also be expected to account for 90 per cent of the employment in this field—or about 13,500 direct jobs and 27,000 indirect jobs. Australian exports of refined and unrefined petroleum products were valued at over $10 billion in the 2006-07 financial year.

Australian petroleum production has been declining slowly since a peak in 2000. However, the Australian Bureau of Agricultural and Resource Economics, or ABARE, projects that production will increase from now over the medium term before declining to below 500,000 barrels a day by 2029-30. This increased production will likely be met from new offshore reserves. The number of onshore exploration wells has been declining over the past two decades, while the number of offshore wells drilled has remained approximately constant. In contrast to onshore activity, offshore exploration expenditure has been increasing significantly.

Despite the difficulties of the procedure and the nature of the work, we have been forced to look well beyond our shores for such a precious resource. Locating an oil and gas ‘trap’, as it is known, and extracting the oil and gas is difficult enough on land. But offshore, in deep and often stormy waters, it can be an awesome undertaking. Potential traps are identified by analysing seismic survey data, but whether they contain oil or gas will not be known until a drill bit penetrates the structure. Directing the drill bit to a precise location, perhaps several kilometres away, requires sophisticated computer technology. A navigation device installed above the drill bit feeds back information which enables the exact position of the well to be measured and monitored.

In Australia up to 100 offshore wells per year are drilled. About a quarter of these are development wells to produce oil or gas found by previous drilling. Before a well can be drilled, government approval must be obtained. Drilling must then conform to statutory conditions, and further operations are covered by industry codes of practice.

In Australia’s medium to large fields, fixed production platforms are commonly used. These platforms house all the processing equipment and can accommodate up to 80 workers, who typically work a 12-hour day, one week on and one week off, or sometimes on longer cycles of two weeks on, two weeks off. There are also concrete structures which are big enough to store oil; gravity holds them on the seabed. The world’s biggest platforms are larger than a football field and rise above the water as high as a 25-storey office tower. The largest platforms in the world can be home to up to 500 workers.

There are still some issues which workers in the industry inform me need addressing in the future—issues which, of course, this legislation cannot deal with. These include ensuring that there are specific offshore national licensing procedures and that accredited certificates of competency are required for high-risk work—the cranes, the rigging and the scaffolding, for example; improving and standardising accommodation standards across the offshore industry to ensure that the men who work in their shifts have reasonable accommodation when they are not working; addressing the skills shortage—the use of visa workers in drilling and servicing companies is becoming more common through a lack of genuine training in past years by the industry; and ensuring that the regulatory body, NOPSA, has proper enforcement powers to make sure that standards and guidelines work throughout the offshore industry.

This legislation provides certainty to the industry. It is important that, when oil companies are developing the fields of Bass Strait and other resources, they look to source much of the work from Australian contracting companies, as opposed to perhaps bringing in companies from overseas who may have alliances with the oil companies drilling in Australia but who may be more expensive in the Australian operation. The foreign companies receive favouritism because of arrangements in other oilfields, to the disadvantage of Australian producers.

The offshore oil industry is an important industry for Australia. The workers employed in that industry, the unions that represent them and management do a great job to try to secure our energy supplies for the future. I commend the bill to the Committee.

Martin Ferguson (Batman, Australian Labor Party, Minister for Resources and Energy) Share this | Link to this | Hansard source

in reply—I thank the honourable members who have contributed to the debate on the Offshore Petroleum Amendment (Datum) Bill 2008. As I said when I introduced the legislation into the House, the purpose of the bill is to make very minor technical amendments to the datum provisions included in the Offshore Petroleum Act 2006. The bill will give effect to the policy intention for the Offshore Petroleum (Miscellaneous Measures) Act 2008, ensuring the correct use of the datums AGD66 and GDA94. The bill will remove uncertainty about title boundaries for petroleum titles, which is very important; ensure alignment between existing and future titles; and facilitate the award of new exploration permits and the release of new exploration acreage.

The bill will also correct an error resulting from a technical oversight in the Offshore Petroleum Amendment (Miscellaneous Measures) Act 2008 which inadvertently replaced all references to the Australian geodetic datum, or AGD66, with the geocentric datum of Australia, or GDA94. The amendments in the Offshore Petroleum Amendment (Miscellaneous Measures) Act 2008 commenced on 1 July 2008.

To explain this technical matter further, a ‘datum’ is a mathematical surface on which a mapping and coordinate system is based. The Australian geodetic datum, or AGD66, was based on a mathematical surface of the earth which was designed to fit the Australian region. I am sure the member for Mallee, who is in the chamber and is an engineer, understands the nature of this debate. While this has been a good datum for local use, it has an origin approximately 200 metres offset from the earth’s centre of mass.

The advent of global positioning systems has justified the adoption of an international geocentric, or earth centred, datum. This is the Geocentric Datum of Australia 1994, or GDA94. You learn something new every day! Under the recently repealed Petroleum (Submerged Lands) Act 1967, the graticular sections and blocks on which petroleum titles are based had been determined by reference to AGD66. The responsibility of government was therefore to provide certainty for petroleum titleholders, ensure that title boundaries do not change and maintain alignment between existing titles and new titles, so the Offshore Petroleum Act 2006 was necessary. That act, which replaced the Petroleum (Submerged Lands) Act 1967 and came into effect from 1 July 2008, allowed continued determination of graticular sections and blocks by reference to AGD66.

To more accurately reflect the global positioning system which is increasingly used for surveying and navigation, the points, lines and areas in a petroleum title have been described since 2002 using GDA94. However, the grid on the earth’s surface used to determine title areas—that is, AGD66—has to remain unchanged. Although the advent of global positioning systems justifies the adoption of an international geocentric datum, the Offshore Petroleum Act still needs to refer to AGD66 for the purposes of determining the position of graticular sections or blocks and refer to GDA94 for certain other purposes, including describing coordinates of a point in a title. If graticular sections or blocks are determined by reference to GDA94, as the amended Offshore Petroleum Act currently states, the grid used to determine the position of the titles will move approximately 200 metres in a north-easterly direction from a grid that refers to AGD66. This was not the policy intention and would cause concern and uncertainty for industry if not corrected. For example, if not corrected the situation may create uncertainty for existing titles and risk future titles moving out of alignment with existing titles.

It is proposed that the amendments in schedule 1 of this bill have retrospective effect from 1 July 2008 to provide the following benefits to industry: firstly, to remove uncertainty about title boundaries for petroleum titles; secondly, to ensure alignment between existing and future titles; and, finally, to facilitate the awarding of new exploration permits and the release of new exploration acreage. There are no adverse effects on industry due to retrospectivity. Industry welcomes it.

This is a technical but nonetheless important and urgent amendment bill. Until the datum provisions in the Offshore Petroleum Act are amended, it is necessary to suspend the release of new exploration areas and the grant of new and renewed petroleum titles. Early amendment of the Offshore Petroleum Act is required to enable offers of exploration permits to successful applicants over areas for which bidding closed on 18 April 2008 and re-release in October 2008 of areas that received no bids.

I express the government’s appreciation to those members who have contributed to this debate. It gave them the opportunity not only to talk about the technical nature of the bill before the House but also to appropriately focus on the importance of the oil and gas industry to Australia, both in terms of domestic energy security and also in the context of us being a major exporter of energy supplies. I specifically refer to the contributions by the member for Groom, the former Minister for Industry, Tourism and Resources, and the members for Corio, Werriwa and Maribyrnong.

Whilst I appreciate the member for Groom’s support for the legislation, I will make a few concluding remarks with respect to a number of other issues that he raised during the course of the debate. Firstly, with respect to his remarks concerning the government’s commitment to develop a carbon pollution reduction scheme and the uncertainty he believes it has created in the oil and gas industry, I simply say that the government is involved, as it is a green paper process, in genuine consultation with representatives of the oil and gas industry, both at a peak council level and at an individual company level.

We are about making sure that the Carbon Pollution Reduction Scheme not only assists industry in reducing greenhouse gas emissions but in a measured way also maintains a capacity for the industry to grow and expand in Australia, thereby creating additional export opportunities, jobs and training opportunities for Australia. We understand there are concerns, and representatives of the industry participated in a day of consultations that I undertook with my department and representatives of other ministerial offices and departments in Canberra on Friday last.

In going to the issue of the member’s more extensive remarks about the government’s decision to remove the condensate excise exemption, can I say the government appreciates that, yes, it is fair enough to have incentives to actually get major resource projects up and running in an initial instance. But I think, in the context of the national interest, the Australian community also accepts that once such major projects are up and running the Australian people are entitled to get their fair value from their resources. The government makes no apologies for reviewing the condensate excise on a project that has been in place for 24 long years and has produced a great incentive to the development of the North West Shelf. It is now a mature project in the context of oil and gas prices far higher than those in the original time frame for the development of the project 24 years ago. It has also been a highly profitable project for those companies which saw Australia as a good place to invest. The record shows that their investment has actually produced considerable financial benefit not only to Australia but also to those companies.

For the information of the chamber, this condensate exemption has represented a major gain for one project. For example, over the last five years it has been to the tune of at least $1.5 billion. We believe that, given those considerable opportunities for the North West Shelf Venture partners, the Australian community is entitled to have this condensate excise reviewed so as to guarantee that it gets a fair share of the proceeds of the commodities boom. I also indicate to the chamber that the North West Shelf has also had a major competitive advantage over all other gas projects in Australia that are struggling to get off the ground. This is important to me, because when you look back over 24 years you see that we have only got two oil and gas projects to market. I am not accepting that that is good enough. Our responsibility is to create opportunities for other investors to bring projects such as Gorgon, Browse and Sunrise to fruition. Our government is going to level up the playing field to get more competition in the market and more investment in Australia’s gas resources for our future prosperity and in the nation’s best interests.

In terms of a factual consideration of this matter—and I ask that the member for Groom take this on board—the tax is a tax on condensate. Condensate is not gas; it is like crude oil. It is not a tax on natural gas. I say this because there has been some press speculation—I suppose in the context of the state election in Western Australia that will be held on Saturday—about a claim by Woodside, one of the North West Shelf venture partners, that domestic gas prices will increase as a result of this tax. From the government’s point of view, there is no good reason why domestic gas prices should increase.

More importantly, I would remind Woodside and others involved in the project that I did not see any offer of lower gas prices to customers when the crude oil excise rate was cut in 2001. That has produced significant gains of about half a billion dollars, although if you actually examine the Hansard of the relevant debate in 2001 you see that the then government—represented by the then member for Leichhardt and former Parliamentary Secretary to the Minister for Industry, Science and Resources, Mr Entsch—indicated that it estimated that the cut would produce benefits to the North West Shelf partners of about $75 million over 10 years, so I think they have done considerably well out of that decision by the previous government to actually reduce tax with respect to this project. I cannot understand why these venture partners would suggest that if one concession were reduced prices should go up. Alternatively, when tax on their project was considerably reduced there was no indication of them reducing the price of gas for domestic or international partners.

This is a highly technical debate but it appropriately gave members an opportunity to talk about an industry that is exceptionally important to Australia in export opportunities, an industry that is also going to grow in importance in the Asian region because countries such as Korea, China and Japan are looking to Australia for energy security. They regard the LNG industry as a clean energy industry and they are looking for us to further develop the industry and to bring on projects such as Gorgon, Browse and Sunrise. As I said recently during a visit to China, Australia is open for business. We simply say to those countries interested in investing in Australia that projects such as the North West Shelf clearly indicate that Australia is a good place to do business. If any of those companies are interested in further investment in Australia, and also in applying for our retention leases, they should consult the department and my office because we will be doing everything possible to facilitate such investment.

I am also pleased to say that, in the context of the development of the Carbon Pollution Reduction Scheme and the detailed discussions held with 50 to 60 companies here in Canberra last Friday, not one company argued against the introduction of such a scheme. The debate was about the nature of the scheme and also international considerations. I simply remind the House that you would not have got that commitment from industry two to three years ago. They understand that, from the Australian government’s point of view, the time has come for us to act as a community but also to have regard for international developments in the context of developing such a scheme.

In conclusion, I note that the Notice Paper provides for a discussion of the Standing Committee on Primary Industries and Resources report entitled Down under: greenhouse gas storage. I welcome that debate in the Main Committee. The primary industries and resources committee did an exceptionally good job in the consideration and preparation of that report. The Main Committee presents an opportunity for members to contribute to what is going to be a key debate for Australia in the context of developing the Carbon Pollution Reduction Scheme.

We will see in the future a growth in renewables, but Australia, like the rest of the world, will remain a heavily fossil fuel dependent community and, as part of that, we have to make sure that we invest in technology which will enable us to extract carbon dioxide and safely store it, therefore guaranteeing that we maintain fossil fuel energy opportunities in Australia which are low in emissions. That is not only important to Australia but also important to the global community because not only are we a nation that is heavily dependent on coal-fired power stations but we are a major exporter of coal, and the world in which we live, especially the Asian region, is looking to us to provide not only coal but also LNG, uranium and a range of other energy sources to power their economies and to facilitate economic growth in countries such as China and India. I thank the members for their contributions to the debate and commend the bill to the House.

John Forrest (Mallee, National Party, Shadow Parliamentary Secretary for Trade) Share this | Link to this | Hansard source

Mr Deputy Speaker Georganas, on indulgence: the minister has made reference to my background—hence my interest. I was impressed with the attempts of the member for Corio, the member for Werriwa and the Minister for Resources and Energy to explain the technical nature of the amendment. To put it in simple terms, the challenge of surveying is to take into account the curvature of the earth. It is not a two-dimensional profile; it is three-dimensional. Add to that the fact that petroleum exploration is conducted two and three kilometres below the surface of the earth. The title is actually a concentric keystone in three dimensions with a curved surface; that is probably the best way I can explain the challenge to laymen. But I commend those members who have attempted to explain the highly technical nature of the bill.

Question agreed to.

Bill read a second time.

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