Misconceptions undermine Australian petroleum exploration: APPEA

NEGATIVE public perceptions about petroleum are compromising growth in our national wealth and setting the stage for a blow-out in Australia’s current account of unprecedented proportion, according to peak industry body, the Australian Petroleum Production and Exploration Association (APPEA).
Misconceptions undermine Australian petroleum exploration: APPEA
Misconceptions undermine Australian petroleum exploration: APPEA
Misconceptions undermine Australian petroleum exploration: APPEA
Misconceptions undermine Australian petroleum exploration: APPEA
Misconceptions undermine Australian petroleum exploration: APPEA

“The incorrect perceptions of the oil and gas industry – and related Government policy - must quickly change if Australia is to maximise the community’s return from the nation’s petroleum resources,” APPEA chairman Reg Nelson said yesterday.

“Failure to grasp this ‘change’ opportunity will see Australia hit by a steeply rising import bill for energy, which could reach an unprecedented $25 billion a year within a decade,” he said.

Nelson was speaking in Perth on the eve of APPEA’s 45th annual conference and exhibition – the largest event of its kind in the Southern Hemisphere – which has attracted more than 1100 delegates from 20 countries to the Western Australian capital.

“Large sections of the public and some of the nation’s key policy makers seem to lack a positive view about oil and gas exploration and development. High oil prices are presented as a recipe for gloom and doom, even for a recession,” he said.

“Yet these same people do not have similar negative perceptions of the mining or agricultural sectors.

“For instance, high mineral prices are seen as creating national wealth and stimulating new mine development around the country, bringing with them highly prized jobs and export income. But, for some reason, people do not see their long term hip pockets benefiting from appropriate policies to facilitate investment in oil and gas.

“The community at large has little recognition that key providers of energy, companies like Woodside, BHP Billiton, Santos, Origin and a host of small independents, generate shareholder value that is a mainstay of income and wealth generation in superannuation funds.”

Nelson said that while coal and some mineral prices had increased much more than the oil price over the past five years, the pervading view of these shifts was that they were good for Australia and we ought to do more to help them.

“Why is it that the search for oil and gas - which has all the same requirements for investment, skills and effective policy - is regarded in a different light to other industries?,” he asked.

“Do we have an insidious undercurrent in community attitudes? If so, this is a worrying portent for the wealth creation that will support our future jobs and export income.

“Perhaps the perception of companies in our industry is driven by the jaundiced view of ‘big oil’ generated amongst consumers as prices rise at the petrol bowser. These negative perceptions make it difficult to create a climate within governments which is responsive to the need for policy change.”

Nelson said Labor and Coalition state and federal policymakers agreed that developing Australia’s petroleum resources was a national priority, but strategic priorities had not been agreed upon and appropriate policies have not always been implemented.”

“While development of specific projects is vital to the final wealth creation outcome, too much emphasis has been placed, at times, on specific project facilitation at the expense of setting a policy framework that encouraged maximum exploration and development,” Nelson said.

“Key players in our industry must also play a part in shifting the focus onto the policy needs of the industry as a whole.”

Nelson said government’s response to industry concerns was hampered by the on-going loss of corporate memory and skills from the senior ranks of all the public services, as key officials departed and took their specialist knowledge with them, and were replaced by generalists.

He said the petroleum industry had established three strategic priorities – developing a more effective dialogue with governments to change perceptions of the industry; upgrading the national focus on exploration and broadening it to encompass both oil and natural gas; and creating a focus on gas development for both domestic AND international markets.

“We need speedy progress on all of these priorities if we are to avoid an economic calamity in this country,” Nelson said.

“Allowing for increasing LNG export income, and using reasonable price and production assumptions, the growing gap between Australian demand and Australian production could mean that last year’s total deficit on the balance of trade doubles within a decade,” he said.

“It could jump by $25 billion per annum solely due to increased petroleum imports.”

Within this strategic framework, the key area for immediate policy action was in relation to the fiscal regime, according to Nelson.

“A suite of measures is needed, each targeted at different segments of the exploration and development scene,” he said.

“Changes to the Petroleum Resource Rent Tax are vital and changing the general project cost uplift factor is one of the urgent priorities. But it is not a panacea for everyone. Other tax measures are required to stimulate different parts of exploration activity. A more level fiscal playing field needs to be established between fuels.

“The equation is simple. If the tax system is not improved, economic wealth will be lost, the budget and trade balances will be worse off, environmental aspirations will not be met, supply security requirements will be weakened and markets will be less competitive.

“APPEA and the governments must act now.”

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