While recent changes to the international tax regime under the Government’s Review of International Taxation Arrangements were welcome, more reform would be needed to encourage exploration, Henderson said.

“With depleting oil reserves and rising fuel prices it’s a good time to look at tax reform measures to encourage exploration,” he said.

“There is a view that exploration is declining in Australia, and there is a real concern in the industry over the costs of exploration. We need to spend more on exploration to find new reserves.”

Henderson suggested that exploration could be encouraged by an unrestricted grossed-up exploration deduction for income tax purposes, similar to the current 150%-175% research and development concession.

He also said tax depreciation incentives and a flow-through share scheme similar to Canada’s long running scheme would also encourage exploration.

“Currently, if Australian oil and gas companies make a loss overseas they can’t use that to offset their tax in Australia. That’s inefficient”