INVESTMENT in oil and gas exploration will need to double in the next five years in order for Australia to maintain its current production levels, an industry issues paper has warned.
Companies spent about $1 billion drilling for oil and gas last year, but low success rates for oil exploration and the small size of discoveries has seen replacement reserves dwindle.
The Australian Petroleum Production and Exploration Association (APPEA) and consultants Wood Mackenzie found local oil production had already fallen from about 80 per cent of domestic demand to about 60 per cent in the past decade.
But that could plummet to as low as 20 per cent by 2015 without major new oil discoveries.
Companies have had more success in making gas discoveries in Australia.
However, many large gas fields are left undeveloped due to the high cost of bringing them into production and the low rewards they bring, with domestic gas prices in Australia at least two thirds lower than the United States and Britain.
The APPEA issues paper, to be released today, warns at least five major discoveries are needed by 2010 to maintain current production levels.
Companies will have to venture into previously unexplored "frontier" areas offshore in order to achieve that target, the paper says.
In a speech to the annual APPEA conference in Queensland today, APPEA chief executive Belinda Robinson will call on governments to help make Australia "as competitive a destination for exploration and production investment as is reasonably possible".
Ms Robinson believes some government leaders seem determined to maintain a position of ignorance on the implications of declining oil production.
"Governments understand struggling industries but dealing with an industry that is doing well is a different matter entirely," she said.
The issues paper explores a range of measures aimed at keeping the Australian oil and gas industry competitive, including changes to state and federal tax regimes, certainty on greenhouse policies, education and training and availability of technical data.
The paper argues for changes to the way in which expensive oil and gas developments are depreciated and considers further incentives for exploration, including the introduction of a flow-through share scheme.
It also calls for a consistent national approach to policies on greenhouse gas, warning that a state government-led push for an emissions trading scheme would add to risk and discourage investment in long-life projects.
APPEA chairman Reg Nelson said the Australian oil and gas industry was at a crucial fork in the road.
"Australia is confronted, as never before, with the need to make a substantial investment in the nation's energy future," he said.
"We can embark on a pro-active and successful partnership between industry and government to the benefit of all.
"The alternative is to constrain the industry's ability to make the maximum contribution possible to Australia's indigenous petroleum production, energy security and economic welfare with policy settings that are not appropriate for the times ahead."
Post a Comment