RECENT ANNOUNCEMENTS

On 13 June 2013, ASX-listed Orca Energy Limited announced it will sell its 20% participating interest in PEL 115 in South Australia to ASX-listed Senex Energy Limited in exchange for a A$7 million package of benefits. Orca will retain its 20% interest in the Fury oil discovery and the Burruna-1 oil well, two key assets within PEL 115.

On 4 June 2013, ASX-listed Tap Oil announced its wholly owned subsidiary Tap (Shelfal) has agreed to farm-out a portion of its interest in Exploration Permits WA-320-P and WA-155-P (Part II) to JX Nippon Oil and Gas Exploration (Australia). Tap will farmout 10% of its interest in WA-320-P and 7% of its interest in WA-155-P (Part II) in exchange for a 5% carry on a well (up to a total well cost of US$70 million) in the Palmerston gas prospect, which straddles the two permits.

On 23 May 2013, Bengal Energy announced that it has agreed to form a strategic joint venture with ASX-listed Beach Energy for the exploration of Bengal’s Tookoonooka Block (ATP 732) in the Cooper Basin. Beach Energy will farm-in to the tenement by funding Bengal’s share of a two well drilling and 3D seismic exploration and appraisal work program (up to A$11.15 million),  to acquire a 50% interest in ATP 732, which covers over 2,600 square kilometres.  Commencement of the joint venture is subject to certain conditions including regulatory approval, legal due diligence and finalising a definitive farm-in agreement and joint operating agreement. Bengal anticipates finalising such agreements prior to 31 July 2013.

Petroleum acreage releases

In the past month, the Commonwealth government and the Queensland, Victorian and Western Australian State governments have each announced the release of petroleum exploration acreage.

The Commonwealth’s Offshore Petroleum Exploration Acreage Release consists of 31 areas, located across six basins in offshore areas around Australia. Bids for the first round of 20 areas close on 21 November 2013. Bids for the second round release of the remaining 11 areas close on 22 May 2014. For more information on the acreage release visit the Commonwealth’s petroleum acreage release website.

The Queensland government has released approximately 8,783 square kilometres of land for exploration, comprising six areas that will be competitively tendered. There is no cash component involved in the bid assessment. Bidders will be assessed on their work programs and their ability to meet evaluation criteria, such as complying with environmental requirements. In addition, the Queensland government has opened its second competitive cash tender process in relation to approximately 295 square kilometres of land in the Surat and Bowen Basins which it describes as highly prospective. This second tender process does include a cash component. Applications for the non-cash tender process must be lodged by 22 November 2013. Applications for the cash tender process must be lodged by 10 October 2013. For more information on these acreage releases, visit the Queensland Department of Natural Resources and Mines website.

The Victorian government has opened its petroleum acreage releases for 2013 and is offering two areas in the onshore Murray Basin, and two offshore areas in the Gippsland Basin. Applications close on 21 November 2013. For more information on this acreage release, visit the Victorian Department of Environment and Primary Industries website.

The Western Australian government has released six areas for exploration across the Northern Carnarvon Basin, Southern Carnarvon Basin, Officer Basin and Perth Basin. Applications close on 14 November 2013. For more information on this acreage release, visit the Western Australian Department of Mines and Petroleum website.

RECENTLY COMPLETED DEALS

The Australian Financial Review reported on 2 July 2013 that the NSW government has sold the Eraring Energy power stations to ASX-listed Origin Energy for A$50 million and terminated a contract to develop the proposed state-operated Cobbora mine. Origin Energy already owned power output from Eraring Energy. The NSW government had committed to sell coal from the proposed mine to Eraring Energy. As part of the deal, Origin Energy accepted an A$300 million payment from the government for agreeing to the cancellation of the coal supply agreement with Cobbora mine.

On 11 June 2013, PetroFrontier Corp announced it has agreed with Statoil Australia Oil & Gas AS amendments to an existing farm-in agreement under which Statoil can acquire up to 80% of PetroFrontier’s working interest in exploration permits 103, 104, 127 and 128 and exploration permit applications 213 and 252 and Statoil will fully fund up to the next US$160 million of exploration costs in these permits. These permits and applications relate to areas in the Southern Georgina Basin in the Northern Territory. Under the amended farm-in agreement, Statoil will become the operator effective from 1 September 2013. Statoil has indicated that these exploration assets will be Statoil’s first shale operatorship outside the US.

The South Australian government announced a wholly owned subsidiary of Northern Petroleum Plc is the successful bidder for PEL 629 covering an area of 5,800 square kilometres and with shale oil prospectivity.  PEL 629 is located in a lightly explored, but producing, part of the onshore Otway Basin. The award is for an initial period of five years. While PEL 629 is also prospective for conventional oil and gas, Northern Petroleum will focus on its unconventional potential.

MARKET RUMORS & OPPORTUNITIES

On 17 June 2013, the Wall Street Journal reported, based on a sales flyer, that joint venture partners ASX-listed Roc Oil, ASXlisted Beach Energy, Indonesia’s Pertamina Hulu, and Japan’s Sojitz have put up for sale their combined 100% interest in the Basker Manta Gummy asset in the Gippsland Basin in offshore Victoria. The asset, estimated to have 200bn cubic feet of natural gas and 15m barrels of oil, could require an investment of up to US$700 million.

The Australian Financial Review reported on 12 June 2013 that Chevron may be interested in ASX-listed Santos, due to its growth profile from stakes in LNG projects valued at over A$35 billion. Chevron’s recent A$349 million joint venture deal with ASX-listed Beach Energy in the Cooper Basin may allow Chevron to assess the commercial potential of the Cooper Basin before making any potential offers to Santos.

On 7 June 2013, The Australian Financial Review reported that Hastings Funds Management is selling its 20% stake in South Australian power transmission business ElectraNet. State Grid Corporation of China, which acquired 41.1% of ElectraNet from Powerlink in November 2012 for A$500 million, is reported to be a likely buyer.

According to MergerMarket, Beijing wind farm developer and operator Guohua Energy Investment is focusing its Australian wind farm acquisition search on greenfield wind projects of around 100 MW. Guohua has acquired 75% of the Woolnorth wind farm and 75% of the Musselroe wind farm projects from Hydro Tasmania over the last two years. Guohua is looking to acquire more assets in 2013, and is reportedly interested in bidding for Infigen Energy’s 140.7 MW Capital wind farm, which Infigen recently announced it is considering selling, as reported in the June edition of the Australian Energy Sector Update.

The Australian reported on 23 May 2013 that Royal Dutch Shell does not have near-term plans to sell its 24% stake in ASX-listed Woodside Petroleum. According to the report, CFO Simon Henry said Shell still plans to sell the holding, but will not do so “below value”. He noted progress on Woodside’s Browse LNG project could provide an opportunity for Shell to divest its holdings, if the market recognises Browse’s value and therefore values the shares more fairly.

REGULATORY UPDATES

ISSUES PAPER PUBLISHED ON RETAIL ELECTRICITY PRICE REGULATION METHODOLOGY

The Australian Energy Market Commission (AEMC) has been requested by the Standing Council on Energy and Resources to provide advice in relation to a best practice method for setting regulated retail electricity prices for small customers.  This advice forms part of a broader package of energy market reforms agreed to by the Council of Australian Governments in late 2012. The AMEC has published an issues paper for public consultation to commence the development of its advice. Stakeholder submissions on the issues paper close on 12 July 2013.  The AEMC intends on giving a draft report to jurisdictions and jurisdictional regulators for comment by 30 August 2013 and publishing a final report by 30 September 2013. The issues paper and other information can found at the AEMC’s website.

STAMP DUTY EXEMPTION FOR FARM-IN ARRANGEMENTS IN QUEENSLAND

The Queensland Commissioner of State Revenue has confirmed the exemption from stamp duty for farm-in agreements announced in the 2012-2013 State Budget. Pending appropriate legislative amendments, the exemption will be administered by the Commissioner’s recent Public Ruling. Under the exemption, duty will not apply to exploration and development expenditure under a farm-in agreement. However, duty will be payable to the extent there is any other consideration in relation to the agreement, such as an up-front payment.

PETROLEUM (ONSHORE) AMENDMENT BILL 2013 (NSW)

The Bill proposes to amend the Petroleum (Onshore) Act 1991 (NSW) to increase penalties for offences relating to mining for petroleum without authority, and to extend the powers of inspectors to enforce industry compliance, amongst other amendments. ABC News reported that the NSW Energy and Resources Minister said the Bill will address community concerns and will establish clearer standards for the coal seam gas industry.

TAX LAWS AMENDMENT (2013 MEASURES NO. 2) BILL 2013 (CTH)

The Bill proposes to amend the Petroleum Resource Rent Tax Assessment Act 1987 (Cth) to address the unintended impacts arising from the 2012 decision of the Full Federal Court in Esso Australia Resources Pty Ltd v Commissioner of Taxation. The Bill proposes to prescribe that:

  • expenditure incurred that is not solely in relation to a petroleum project can be apportioned with that portion incurred in relation to the project being deductible;
  • look-through is not required in relation to payments to unrelated third parties for project activities, and the deductibility of the payments depends on the character and nature of the activity procured; and
  • look-through is required in relation to payments to related contractors for project activities, and the deductibility of the payments is limited to the expenditure incurred by the related contractor in providing the services, and the character and nature of the expenditure.

NATIONAL GREENHOUSE AND ENERGY REPORTING AMENDMENT (LNG, LPG, OPT-IN SCHEME AND OTHER MEASURES) REGULATION 2013 (CTH)

The amending regulation amends the National Greenhouse and Energy Reporting Regulations 2008 (Cth). It proposes to create specific reporting requirements for new categories of liable entities under the carbon pricing mechanism, and specifies how to measure amounts of natural gas to calculate potential emissions.

OTHER NEWS

REFORMS TO QUEENSLAND’S ELECTRICITY SECTOR

In mid-2012 the Queensland government established an Interdepartmental Committee on Electricity Sector Reform (IDC) to examine cost pressures on rising electricity costs, specifically network costs, electricity supply and retail competition. The IDC recommended urgent reform and proposed three core strategies:

  • improving network efficiency;
  • maximising benefits of competition; and
  • developing a more efficient role for government.

The Queensland State government has accepted, or accepted in principle, all but two of the IDC’s recommendations (with those two recommendations subject to further consideration), and, in mid-2013, is planning to release a discussion paper for a 30-year electricity strategy to guide the reliable and costeffective delivery of Queensland’s electricity in the future.

As part of reforms to the electricity sector, in mid-June the Queensland Minister for Energy and Water Supply announced the removal of electricity price regulation in south-east Queensland by 1 July 2015 and the introduction of price monitoring. The Queensland Competition Authority will keep its current role of price setting for the Ergon area while the Government finalises its strategy for introducing retail electricity competition into regional Queensland.  He also announced a proposal to bring State-owned electricity distributors Ergon and Energex under a single company for possible savings of over A$580 million over seven years.

ADANI PLANS FOR 250KM TRANSMISSION LINE

On 19 June 2013, The Australian Financial Review reported that the Adani Group has flagged plans to build a 250 kilometre high-voltage transmission line – which would be the first high voltage transmission line built by the private sector in Queensland.  The transmission line is intended to connect Adani’s Carmichael mine to Powerlink’s Strathmore substation near Collinsville in the Bowen Basin.

WOODSIDE REVEALS CAPITAL COST OF ONSHORE BROWSE LNG DEVELOPMENT

On 10 June 2013, The Australian reported that the Browse project, led by ASX-listed Woodside Petroleum, revealed the capital cost of a potential onshore development in a formal declaration to the Commonwealth and Western Australian governments. Neither Woodside nor the governments commented on the details of a commercial viability report submitted by the Browse partners (Woodside, Shell, BP, Mitsubishi/Mitsui and PetroChina), but it is speculated the cost is as high as A$90 billion to A$100 billion.

The capital costs for development of the Browse gas fields are significantly less if floating LNG technology is used. In April, Woodside announced onshore development would not be economic – a conclusion its Browse partners have now formally supported. On 19 June 2013, The West Australian reported that Western Australian Premier Colin Barnett has issued a veiled threat to strip the Browse partners of their State-based gas retention leases next year if they pursue floating LNG.

GLADSTONE LNG RIVALS IN GAS SHARING DEAL

On 4 July 2013, ASX-listed Santos announced it has signed an agreement with QGC to link their respective coal seam gas export pipelines. Two interconnections will allow the companies to buy, sell and swap gas. The interconnections will avoid interrupting either project’s gas field operations during downtime, such as planned maintenance. Construction of the interconnections is expected to be completed in 2014.

CLEAN ENERGY AUSTRALIA REPORT

The Clean Energy Council has published its 2012 Clean Energy Australia Report, which provides an overview of the renewable energy sector in Australia. According to the report, 13.4% of electricity was generated from renewable sources in Australia in 2012. While investment in wind power saw a rise of almost 50%, overall investment in renewable sources in Australia fell by approximately A$1.27 billion from 2011. The report refers to a 10% global decline in investment in renewable energy