New fiscal measures for research and development, and small business initiatives were also on the receiving end of a budget that was more aimed at softening up voters ahead of the upcoming Federal election.

While the much anticipated Flow Through Share Schemes did not eventuate in this year's budget, there has been some goods news for specific parts of the petroleum exploration sector, particularly the ‘Big Oil’ end of town, which has the funds to target deepwater prospects.

The Federal Budget's taxation incentive to encourage exploration in Australia's remote offshore areas will allow an immediate uplift to 150% on petroleum resource rent tax deductions for exploration expenditure incurred in designated offshore frontier areas.

The Minister for Industry, Tourism and Resources will determine the designated areas from each year's offshore acreage release areas. The measures will apply to the annual acreage releases in 2004 and 2008.

"This measure should improve the after tax economics when assessing whether to explore for petroleum in the designated frontier areas. It should act as an incentive to exploration in what are usually higher cost "deep water" areas", said Mr Rod Henderson, Tax Partner from KPMG's Energy and Natural Resources Group this morning.

Lobby group APPEA was pleased with the outcome, with the often strained relationship between itself and the Minister’s office sounding like a thing of the past, noting “this was the third successive year the Minister for Industry, Tourism and Resources, Mr Ian Macfarlane, had delivered positive budgetary outcomes for the upstream oil and gas industry.

“The Minister’s hard work and ongoing support for the sector is greatly appreciated. It will be important for the petroleum exploration and production industry to work closely with Geoscience Australia to ensure that the nation’s future exploration effort is focused in those under-explored offshore areas that can help in meeting our future oil demand requirements”, APPEA CEO Barry Jones said.

“The Federal Government’s announcement to allow companies an increased deduction for petroleum exploration costs in designated frontier areas under the Petroleum Resource Rent Tax (PRRT) system clearly will provide a timely boost to exploration in what have historically been lightly explored areas,” he said.

“Australia’s ability to meet it’s future oil self-sufficiency needs, and to attract exploration funds, will be improved as a result.”

There was no mention in the Budget of measures to stimulate exploration in frontier onshore exploration, nor was there any stimulation in the investment sector with the much touted Flow Through Shares scheme not seeing the light of day.

It was hoped by passing exploration tax losses through to shareholders that increased direct investment in the resources sector - minerals or hydrocarbons – could be stimulated.

Prior to the release of the Budget, senior WA petroleum civil servants said any failure to equally incentivise onshore exploration would be short sighted and only go part of the way to satisfying the country’s energy demands.