Australia could face an annual trade deficit by 2010 of A$7.6bn on oil imports i ...

Australia could face an annual trade deficit by 2010 of A$7.6bn on oil imports if new discoveries are not made and brought into production, according to Woodside Energy Managing Director John Akehurst. Addressing the recent Australian Bureau of Agricultural and Resource Economics Outlook 2002 Conference in Canberra, he stated that urgent action was required to reverse the trend which would result in Australia’s self-sufficiency in oil dwindling from around 80% to less than 40% by the end of the decade. Critical to reducing the pace of the decline was the need to develop a comprehensive national energy supply strategy and to encourage new investment in exploration, research and the development of new energy supply infrastructure. ‘Australia is currently facing the start of a long-term decline in oil and gas liquids production,’ he stated. ‘Although some good new discoveries have been made recently, these will not be sufficient for the country to continue to meet the majority of its oil requirements from local production. Petroleum demand continues to grow, production from existing fields is declining and the international industry’s interest in new oil exploration areas in Australia is at a low level. Many other countries have introduced more favourable terms to stimulate exploration in frontier areas where costs and risks are significantly higher. Projections prepared by government agencies clearly indicate that a “do-nothing” policy will result in rapidly increasing oil imports and significant economic costs to Australia.’ Akehurst said that Australia had several options to attempt to ameliorate the slide. These included: · Stimulate increased exploration in underexplored frontier and deepwater areas. · Stimulate development of small, complex and currently uneconomic fields. · Increase substitution of oil by gas, including through the use of compressed natural gas (CNG), liquefied natural gas (LNG) and gas-to-liquids (GTL) technologies. · Reduce liquid fuel demand through technology and incentives. He also stated that, while the energy review initiated by the Council of Australian Governments in 2001 was welcomed, a broader review was required to define a national strategy, policies and plans to provide sustainable, secure and competitive energy supplies for the country over the coming decades. He said that the taxation regime applying to oil and gas was an important driver for stimulating investment in exploration, oil and gas development, transportation infrastructure and new technologies - and that this should be a key focus area for review. Akehurst also suggested that changes to the current Petroleum Resource Rent Tax (PRRT) and the Australian Tax Office’s proposed depreciation regime were required if Australia were to attract appropriate investment.