Australia a Great Place to Live and Explore

AUSTRALIA 2012

Offshore Petroleum Exploration Acreage Release

Australia – a great place to live and explore

This document has been developed as a guide only. It does not replace or amend information provided in the Offshore Petroleum Legislation, Regulations and Guidelines available at: In the event that there is a discrepancy between this document and the legislation, the legislation has precedence. Explorers should not rely solely on this information when making commercial decisions.

Australia's economic performance is among the best in the world and the outlook remains positive.

Australia's diverse, multicultural society has a very high standard of living and a long-standing, democratic culture based on the rights of the individual and the rule of law. Australia enjoys a high degree of social harmony, is politically stable and enjoys a quality of life that is among the best in the world.

Australia is a cost competitive location, with high productivity, a stable business environment, close proximity to the major markets of Asia, and has access to highly skilled workforce and innovative technology.

With a regulatory framework that keeps pace with financial market developments, Australia possesses an internationalised currency, no foreign exchange controls, and a highly effective intellectual property rights regime.

Prior to the Global Financial Crisis in 2008, Australia had 17 years of uninterrupted economic growth. Since the brief recession in 1991, the Australian economy has experienced an average GDP growth of 3.3 percent perannum.

Sound macroeconomic policies and structural reform during this time increased Australia’s responsiveness to shifts in the global economy and enabled Australia to better withstand global economic pressures to maintain strong economic fundamentals.

The Australian economy has continued to prove its resilience throughout the recent global financial crisis, and avoided dipping into recession due to well timed and effective fiscal stimulus packages and a continued demand for commodities. Such resilience has seen the IMD World

Competitiveness Yearbookrank Australia the most resilient economy with a population of over 20 million for eight of the past nine years to, and including, 2010[1].

Real GDP in Australia grew by 1.8 percent in 2010–11 and is forecast to rise by 4 percent in 2011–12. Relatively weak economic growth in 2010–11 has stemmed from reduced household consumption spending, and reduced coal exports due to flooding in Queensland. Somewhat offsetting these negative effects have been a strong terms of trade and robust demand from emerging economies within Asia for energy and minerals commodities.

Stronger assumed growth in 2011–12 is expected to be supported by increased economic activity stemming from rebuilding efforts following the Queensland floods and increased export earnings from most energy and mineralscommodities[2].

Australia has continued to be an attractive destination for transnational corporations. This is evident by the rise in foreign direct investment (FDI) inflows in 2010, following the declines of 2008 and 2009. Foreign investment in Australia reached over A$32 billion in 2010, bringing the total to A$508 billion in FDI stocks[3].

Australia is building on its position in the Asia-Pacific region and has established a network of Free Trade Agreements (FTAs) with Singapore, Thailand, and the Association of South East Asian Nations (ASEAN), in addition to agreements with the United States, New Zealand Chile and New Zealand. Australia is also negotiating FTAs with The Peoples Republic of China, Malaysia, the Republic of Korea, Japan, the Gulf Cooperation Council, India, Indonesia, the Trans-Pacific Partnership, and Pacific nations through the PACER Plus negotiations. Further information is available at

General Facts –Australia
Area (kilometres2) / 13 590 000 (land area – including Australian Antarctic Territory- 5.9m)
Offshore marine jurisdiction (kilometres²) / 14 620 000 (marine area – including the Exclusive Economic Zone, TerritorialSea and Extended Continental Shelf)
Population (million) / 22.7
Official Language / English
GDP (current prices) / US$1 507 billion (2011 exchange rates)
GDP per capita (Current Prices) / US$66 948 (2011 exchange rates)
Capital / Canberra (population 358 000 at June 2010)
Main Cities / Sydney (4.5m), Melbourne (4.0m), Brisbane (2.0m), Perth (1.7m), Adelaide (1.2m),
Hobart (0.2m), Darwin (0.1m),
System of Government / Federation (Commonwealth) of:

six states – New South Wales, Queensland, South Australia, Tasmania, Victoria and Western Australia;

three mainland territories – the Northern Territory, the Australian Capital Territory and the JervisBayTerritory; and

seven external territories – Ashmore and Cartier Islands, Australian Antarctic Territory, Christmas Island, Cocos (Keeling) Islands, Coral Sea Islands Territory, Heard and McDonald Islands and Norfolk Island.

Parliamentary democracy based on Westminster system; Federal Parliament consisting of House of Representatives and Senate.

Source: ABS Cat. No. 3235.0; Austrade International Data Comparisons Sept. 2011

Why Explore for Oil and Gas in Australia?

The probability of finding a new petroleum province in Australian waters remains high.

The first Australian exploration permit was granted in 1959 in the GippslandBasin. Today there are over 220offshore exploration permits, 40 retention leases and 80 production licences. From the first oil and gas discoveries in Bass Strait, the North West Shelf and the Timor Sea, through to the recent discoveries in the Carnarvon and BrowseBasins, there is no doubt that offshore Australia is one of the world’s most highly prospective areas for petroleum.

Australia is a gas rich nation and the 2010 Australian Energy Resources Assessment concluded that around 92percent of Australia’s known conventional gas resources are located off the north-west coast of Australia in the Carnarvon, Browse and Bonaparte basins. Known gas resources are also located in south-west, south-east and central Australia, alongwith large coal seam gas (CSG) resources in the coal basins of Queensland and NewSouthWales[4]. Despite this, much of the continent and its offshore areas remain under, and in some areas, unexplored, with over 40onshore and offshore basins awaiting in-depth exploration to determine their full potential.

In 2008, the United Nations Commission on the Limits of the Continental Shelf (UNCLOS) confirmed the location of the outer limit of Australia’s continental shelf, which resulted in the extension of Australia’s jurisdiction over an additional 2.56million square kilometres of seabed. Australia now has more than 14.62million square kilometres of seabed territory, which is in the top three largest marine jurisdictions in the world along with the United States of America and France. Australia is now custodian to around 4 percent of the world’s total seabed, an area with significant untapped exploration potential.

Australia's geographic location ensures it is well placed to meet the rapidly expanding energy needs of the Asia-Pacific region.

The strong consumption growth of oil in non-OECD markets and the sound outlook for liquefied natural gas (LNG) in the Asia-Pacific region, together with relatively resilient petroleum prices, provides the economic driver for ongoing investment in exploration in Australia. Increased demand for energy with the industrialisation of China and India, and other emerging Asian economies, underpins these market conditions.

Some attributes that make Australia an attractive location for offshore oil and gas exploration include:

the regular release of new exploration acreage covering a range of regions from mature to frontier;
access to high quality, geoscientific data and analysis at low or no cost;
continued government support of pre-competitive geoscientific exploration, data acquisition and analysis;
a free market philosophy which welcomes foreign investment - Australia has no mandatory local equity requirements and has no government owned petroleum companies;
proximity to markets in the growing economies of Asia-Pacific;
an attractive policy and legal framework for oil and gas development, conducive to companies of all sizes;
security of title with the right to retain and/or develop a discovery, subject to meeting the specified terms of a retention lease or a production licence;
transparent, predictable and practical regulatory requirements covering all stages of petroleum operations;
expanding physical infrastructure, sophisticated technical and services support, a highly educated workforce and pool of skilled petroleum professionals;
an internationally competitive profit-related tax system;
government assistance with project facilitation, including fast-tracking of approvals processes for declared major projects; and
an open and competitive economy, including deregulated banking and foreign exchange arrangements, a sophisticated capital market and a good record of industrial harmony.

Australia – a Resource Rich Nation with Growth Potential

Australia has an enviable history in the successful development of its abundant natural resources.

According to the Bureau of Resources and Energy Economics (BREE), Australia’s energy and mineral resource export earnings reached record levels in 2010-11, peaking at A$175 billion. This constitutes a 27 percent increase on 2009-10 which was affected by the weaker prices during the global financial crisis. The $175 billion figure also represents a 9 percent increase on the previous record earnings (A$160 billion) set in 2008-09[5].

There were significant increases in export earnings across a range of commodities in 2010-11 including offshore petroleum products.

In 2010-11, crude oil and other refinery feedstock exports increased by 9 percent volume, relative to 2009-10, to 19.7 billion litres. The export value rose A$2.3 billion (24 percent) to A$11.8 billion, compared to 2009-10. These increases reflect higher export prices and occurred despite a 3 percent fall in production caused by cyclone related disruptions, flooding in the CooperBasin and planned outages[6]. During 2011-12 the majority of crude oil and condensate was produced from the CarnarvonBasin (19 146 million litres (ML)) and the GippslandBasin (3303ML). The majority of the remaining production came from the Bonaparte, Cooper and PerthBasins[7].

Although Australia has over 300 crude oil fields, most production comes from seven major fields; Carnarvon, Browse, Bonaparte and Perth Basins offshore Western Australia, Gippsland and Bass Basins off South EasternAustralia.

In 2008, Australia’s identified oil resources were estimated at 30 794 petajoules, made up of 16 170 petajoules (2750million barrels (mmbbl)) of condensate, 8414 petajoules (1431 mmbbl) of crude oil and 6210 petajoules (1475 mmbbl) of liquefiedpetroleum gas (LPG)[8].

In 2011–12, crude oil and condensate production is forecast to remain relatively unchanged. Production increases are expected following the completion and the scheduled start of several new projects. However, these increases are forecast to be partially offset by declining production from maturing oil fields. Export volumes for 2011-12, are expected to remain steady, in line with stableproduction off the north-west coast of Australia. Thevalue of Australia’s oil exports, supported by higher oilprices, is forecast to increase by 13percent to A$13.3billion during 2011-12[9].

In 2010-11, LNG exports increased by 12 percent volume, relative to 2009-10, to 20 million tonnes (Mt). The export value rose A$2.7 billion (34 percent) to A$10.5 billion, compared to 2009-10. These increases were supported by higher production in the North West Shelf region of Western Australia and a lighter maintenance schedule compared to 2009-10[10]. The smaller LPG export value decreased in 2010-11 by A$42 million (4 percent) to A$1.1 billion with a 12percent decrease in export volume. Gas production in Australia during 2010-11 increased by 9 percent to 53.4 billion cubic metres. This increase was due to higher production at the North West Shelf project. Further increases in gas production were limited by adverse weather and flooding in central Australia through 2010 and into early 2011 that reduced production in the CooperBasin[11].

During the 2011-12 period the volume of gas produced in Australia is expected to increase 6 percent to 56.8billion cubic metres. Underpinning this growth will be initial production from the Pluto field, the Halyard gas field and the Reindeer gas field. Export volumes for 2011-12 are forecast to increase by 2 percent to 20.3Mt. The value of Australia’s LNG exports are forecast to increase by 11 percent to total of A$11.6 billion reflecting higher export prices and volumes relative to 2010–11[12].

Current production is supported by Australia’s world-class LNG export facilities which utilise the large quantities of natural gas found on Australia's North West Shelf (NWS). Confidence in the NWS project and the facilities can be seen in the quantity and size of the projects underway and in planning. As an example, production from the Pluto LNG project is scheduled to start in March 2012 and at full production capacity is expected to increase Australia’s LNG export capacity by 4.3 million tonnes per annum (Mtpa). In the first half of 2011, final investment decisions were reached for other LNG projects: the Gladstone LNG (GLNG) project (7.8Mtpa); the first train of the Australia Pacific LNG project (APLNG) (4.5Mtpa); and the Prelude floating LNG project (3.6 Mtpa)[13].

The global trade for LNG has more than doubled in the past decade. Of this global trade, Australia supplies nearly 10percent of the total world’s exports. With A$120 billion worth of LNG investment projects currently underway, the Reserve Bank of Australia has forecast that Australia’s LNG sales could triple in the next five years. This rate of investment is the second highest in the world and is set to continue through Australia’s close links with Asia and an industry push to increase production capacity[14].

Realising Australia's Petroleum Potential

Exploration

Australia holds the potential for further discoveries of oil and gas, with many offshore basins remaining largely, or entirely, unexplored. According to Geoscience Australia (GA) and the Australian Bureau of Agriculture and Resource Economics (ABARE), it is highly likely that these basins contain significant petroleum reserves.

This potential for further discoveries has been grasped by companies with over A$2.5 billion on private exploration being spent offshore in Australia during 2009-10[15].

Only around 20 percent of Australia’s offshore basins are currently covered by petroleum titles. Although exploration activity is primarily focused on finding resources close to existing discoveries to improve the economics of proposed projects, frontier exploration is growing[16]. Australia’s underexplored frontier basins hold the greatest promise of making a major new discovery. To encourage exploration in these areas and help reduce the risk of exploration, GA through Australia’s Offshore Energy Security Program, has undertaken a series of programs aimed at providing precompetitive and geological information aimed at improving the understanding of the petroleum prospectivity and resource potential of frontier basins, more information is available online at: Australia's Offshore Energy Security.

In general, offshore petroleum exploration activity in Australia has remained steady in recent years and the extent of exploration drilling in Australia remains relatively low compared with other regions worldwide. By the end of 2010 approximately 1,400 offshore exploration wells were drilled in Australian waters, with an average of around 60 exploration wells drilled per year since 1995[17].

Offshore Petroleum Development Projects

The Australian petroleum industry is entrepreneurial, innovative and has achieved significant success as recent development projects under consideration and under construction show (see below table). It is made up of a number of small, medium and large companies, many of whom operate on the international scene. Australia's modern legal framework, petroleum tenement system, favourable taxation regime and economic environment explain Australia's consistent high ranking in international investment surveys.

Offshore Petroleum Development Projects

Project / Participants / Location / Targeted Start up / LNG Capacity (Mtpa) / Capital Cost
Projects Under Construction
Gorgon / Chevron, Shell, ExxonMobil / CarnarvonBasin, BarrowIsland / 2014 / 15.0 / A$43b
Pluto / Woodside Energy, Kansai Electric, Tokyo Gas / CarnarvonBasin, BurrupPeninsula / 2012 / 4.3 / A$14.9b
Prelude FLNG / Shell / BrowseBasin, floating LNG / 2016 / 3.6 / na
Wheatstone LNG / Chevron, Apache Energy, Shell, Kufpec / CarnarvonBasin, Onslow / 2016 / 8.9 / A$29b
Project / Participants / Location / Targeted Start up / LNG Capacity (Mtpa) / Capital Cost
Projects Under Consideration
Pluto Expansion / Woodside Energy / CarnarvonBasin, BurrupPeninsula / na / na / na
Ichthys / Inpex, Total / BrowseBasin, Darwin / 2016 / 8.4 / US$20b
Australia Pacific LNG Train 2 / PTTEP Australasia / Timor Sea, floating LNG / 2016 / 2 / na
Browse LNG / Woodside Energy, BP, BHP Billiton, Chevron, Shell / BrowseBasin, Broome / 2017 / Up to 15 / na
Sunrise / Woodside Energy, Shell, ConocoPhillips, Osaka Gas / BrowseBasin, Broome / 2017 / 4 / na
Gorgon Train 4 / Chevron, Shell, ExxonMobil / CarnarvonBasin, BarrowIsland / na / 5 / na
Scarborough Gas / ExxonMobil, BHP Billiton / CarnarvonBasin, Onslow / na / 6 / na
Tassie Shoal LNG and Methanol Project / Methanol Australia, Air Products and Chemicals / Timor Sea / na / 3mtpa LNG 3.5mtpa methanol / US$2.1b

Source: State of the Industry 2011, APPEA