The 2013 APPEA Conference proved to be a platform for both sides of politics to announce their policy directions for oil and gas exploration.  Our alert provides a summary of these issues.

Offshore Petroleum Exploration Acreage Competitive Cash Bidding Process

Resources and Energy Minister, Gary Gray, in announcing the 2013 Offshore Petroleum Exploration Acreage Release at this year’s APPEA conference in Brisbane on 27 May 2013, confirmed that, from 2014, some areas selected for the annual Acreage Release will be considered through a competitive cash bidding process. Cash bidding was first introduced in 1985 under amendments to the offshore petroleum legislation, however it has not been used since 1993. The cash bidding process would be used to allocate exploration permits in areas containing ‘known’ petroleum accumulations, while the existing work program bidding system will be maintained for allocations in remaining areas. In addition to a consideration of each applicant’s technical qualifications and financial resources and the available technical advice, assessment under the cash-bidding process is based on the amount each applicant is prepared to pay for the grant of an exploration permit, with permits often being awarded to the highest cash bidder.

Industry concern

While the Government says that cash bidding will be more equitable, economically efficient and administratively simple, APPEA has expressed concern regarding the increased costs associated with the cash-bidding process, which it says reduces the overall pool of funds available for exploration.

Limits on the ability to renew exploration permits obtained through the cash bidding process

The Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cwlth) contains specific provisions for the renewal of exploration permits granted in response to an invitation for cash bidding. Holders of such permits may not apply for renewal if the invitation for bids stated that the permit was not able to be renewed or if the permit has previously been renewed.

Federal Opposition focus on retention licences

Federal shadow minister for Resources and Energy, Ian Macfarlane, said at this year’s APPEA conference that a coalition government would place an “equal amount, if not more scrutiny” on applications for petroleum retention leases as compared to the current Government. Mr Macfarlane’s approach, should the opposition win the September election, appears to be that greater scrutiny would be placed on the assessment of whether the development is in fact ‘not yet commercially viable’.