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Wednesday, 10 May 1972
Page: 1540


Senator O'BYRNE (Tasmania) - I join my colleagues on this side of the Senate in expressing disappointment that the report, of the Senate Select Committee on Off-shore Petroleum Resources, which deliberated for 2 to 3 years, should receive such scant recognition by the Senate only a few weeks prior to the winter recess, with a busy Budget session ahead and with an election in November. The report is not being dealt with as it should be. If any phase of the Menzies, Holt, McEwen, Gorton, McMahon era of government were to be referred to by historians and by coming generations, it would be the great sell-out of the priceless Australian assets to overseas investors and exploiters. In the Senate yesterday we had a debate on take-overs. The matter of the take-over of Australian companies has been debated widely during the past few weeks. In no industry would a take-over be as effective as it has been in the Australian off-shore oil industry. It is significant that all the old names of the international oil companies - companies which have been able to change the leadership of many nations, companies which have established small kingdoms, principalities and sheikdoms over the past 50-odd years in the Middle East and companies which have exercised great power in war and in peace - feature on the list of those who now own or have leases of huge tracts of off-shore Australia.

In many ways the report illustrates how the legislation was framed as a compromise between the Commonwealth and the States to suit this type of exploitation by overseas interests with vast accumulations of capital. Recently, the Prime Minister (Mr McMahon) spoke of the possibility of Australian investment in Asian countries to assist the development of industries there. How ridiculous this must sound to the ordinary person in the street in Australia. Here we are allowing our assets to be sold, as fast as their sale can possibly be organised under the various company laws and through the stock exchanges, to overseas companies supposedly because capital is not available in Australia to finance the development of our assets. Yet, the Prime Minister recommends that Australian investors direct their money to Asian countries.

It is quite easy to see the reason for this recommendation. The idea of the investment of capital is to make the greatest profit from the smallest outlay. In Australia over a period of years the trade union movement with its political wing, the Labor parties in the various States, and the arbitration courts and the like have protected the interests of the working man to the degree that his standard of living has been partly increased relative to the improving production rate of the country. This has reduced the margin for exploitation available to those who control our industries. But, in keeping with the spirit of capitalism, the Prime Minister says to some of our investors: 'Invest your money in Asian countries. The labour is cheap. The unemployment rate is high. The cost of raw materials is low. So your investment will give you a higher margin of profit'. Obviously this is the philosophy of the Federal Government. It has been extended, in my view, to the off-shore petroleum resources legislation in which the proposition was put to the Australian people that entry into the vast and wealthy off-shore oil industry was beyond the capacity of all except one Australian company.

Reference has been made tonight to the discovery of the Bass Strait oil fields. We heard recently that the royalties that are accruing to Mr Weeks, the adviser to BHP, are such that he is now receiving $6.5m a year in royalties from the Bass Strait oil fields. We hear also that he is to float a company in Australia so that, over a period, investors in that company can obtain the proceeds of the royalties that are payable to Mr Weeks. In turn, the company can pay ready cash to Mr Weeks to distribute amongst his family or in whichever way he wishes. This is an indication of the general basis on which our off-shore oil industry has developed.

The fact is that BHP was considered to be the only industrial organisation that could finance off-shore oil exploration. The options were readily given to it. It was very difficut to get evidence along these lines, but the Bureau of Mineral Resources had quite a deal of information available on the stratigraphic surveys of Bass Strait and this knowledge was available to BHP. When BHP looked for assistance to finance the exploration and exploitation of these oil areas, it went into partnership with one of the biggest oil companies in the world, the Standard Oil Co. whose Australian subsidiary is Esso Standard Oil (Australia) Limited. The Esso-BHP group could quite easily become one of the richest oil empires in the world. The further development goes and the further the areas able to be exploited are extended, the more oil bearing regions are found. The surface of the Bass Strait oil fields has only been scratched, as is obvious from the success that is being enjoyed by this company which is continually drilling additional areas there. 1 turn to the other areas around the Australian coast in which oil exploration is taking place. I refer particularly to Western Australia where exploration rights to enormous areas of tens of thousands of square miles were granted by the State prior to the introduction of this legislation. The granting of those areas was confirmed by this legislation. As a consequence, more and more overseas companies, under the guise of being nominally Australian owned companies - no information is available as to the component investors in those companies - are being invited to participate in farm-outs and the like. This action in turn is adding to the drain of our natural resources to overseas investments.

The recent currency manipulation has left Australian currency values and the Australian investment market in such a position that it is a good paying proposition for companies from countries whose currency values have not been weakened to the extent that the Australian dollar has been weakened to pour all types of investment money, including hot money, into Australia. This money is entering Australia at the present time because of the depreciation by world standards of the Australian dollar. It is very difficult to say whether this situation can be corrected. In the last few days we have heard of the possibility of a further devaluation of the American dollar. This will mean that the Australian dollar will become a relatively much better proposition than 1 currency elsewhere.

In the course of its investigation, the Senate Select Committee on Off-shore Petroleum Resources examined a whole range of matters. I think that the most pertinent was that of Commonwealth-State relations and the manipulation that actually went on to find a way by which the responsibilities that should have, been assumed by the Commonwealth were left in the hands of the States. The 'boundary of territorial waters, which traditionally was a limit of 3 miles off the coast, supposedly was extended to the 200-metre , limit by what was practically a verbal agreement between the Commonwealth and the

States. The States' jurisdiction over the offshore areas extended much further than the boundaries of their traditional territorial waters. Perhaps we could refer to evidence which was given by Professor Sawer. It was substantiated in an article in the Canberra Times' of 15th November 1967 when the professor was referring to the matter of ministerial and parliamentary control. He said:

The trouble with the scheme which the Commonwealth and the States have botched up between them is that it provides neither foi proper legal control of the relevant administrative activities, nor for proper Ministerial and parliamentary control either.

Of course he was referring to the off-shore legislation. He went on to say.

But such political control is highly dangerous unless the Ministers in question are fully answerable to Parliament for the way in which they exercise their difficult and commercially profitable, and legally unlimited and uncontrollable discretions . . .

The State Ministers who will make all the crucial decisions are in no way answerable to the Commonwealth Parliament, whose legislation provides the main basis of their powers.

One could easily imagine the readiness with which one Commonwealth Minister will wriggle out of answering parliamentary questions and criticisms.

Meanwhile, in the State Parliament, the relevant Minister will wriggle out of responsibility just as easily . . .

The ultimate responsibility for these decisions could and should have been placed squarely with the Commonwealth Minister.

Right throughout the Committee inquiry we find this grey area between Commonwealth and State responsibility never properly defined. I believe that it shows a lack of courage on the part of the Commonwealth. It has been referred to recently in another place in relation to the forthcoming meeting on the international law of the sea. That is where this matter has to be grappled with. It is no longer the prerogative of either the State or Federal governments to leave this twilight zone of offshore waters. The Commonwealth must take the responsibility for all activities off the Australian coast. In the very near future it will have to take responsibility for the delineation of boundaries between the Commonwealth and Papua New Guinea. It cannot possibly leave such an important matter to a State government. Although a State government has it own autonomy and sovereignty, under circumstances such as this it must be subservient to Commonwealth and national authority. Right through this legislation we find that these matters have been side-tracked because of the haste to obtain some sort of working arrangement so that the oil in Bass Strait can be exploited and because of the enormous amounts of money which were in sight in the development of this oil rich area. We find that the legislation was put together for the purpose of getting it off the ground.

It is certainly my view that there should be a complete review of all the legislation because of the developments since its introduction in 1964. In that time because of the improvement in the technique of off-shore exploration, the types of drilling rigs which have been developed and the technical know-how which has been acquired not only in this country but also in other parts of the world, there should be another very close look at the whole of our off-shore oil industry. Mention was made earlier of the dissenting report. We drew attention to the matter of royalties. We expressed concern that royalty rates provided under the legislation needed review. The legislation provides royalty reviews every 21 years. It is of interest - this is supported by the statistics which have been presented in the report - that in the neutral zone in the Middle East there is a 20 per cent royalty paid. In Saudi Arabia a royalty of about 22c a barrel is paid. In Iran the royalty is 12i per cent; in the Netherlands - proposed for the continental shelf - it is up to 16 per cent; in France it is up to 14 per cent; in Venezuela it is 161 per cent. These are royalties paid to the governments. In Libya it is 124- per cent; Algeria, 12i per cent; Iraq, Qatar and Kuwait 12i per cent; in the United Kingdom, 12i per cent; the United States of America - federal off-shore - 124 per cent to 16$ per cent; and Australia, in most States and proposed off-shore royalty, 10 per cent. This royalty has been set for a period of 21 years.

An arrangement has been made since the introduction of this legislation, that extensions to leases in the Bass Strait area, or areas which are oil productive, are made for an extra 2i per cent. But in my view the Commonwealth and the States are not receiving sufficient revenue from this great discovery of a natural resource which has potential for helping this country to do so many things which it should be able to do. Reference was also made to permit areas. In my view and in the view of other members of the Committee a review should be made of the terms that surround these permits. It has been mentioned before that some of the areas extending over tens of thousands of square miles of off-shore permits are too great for a company to be able to explore properly and quickly. The present rash of farm-outs is more an attempt to be able to prove the areas which the companies will retain and also to find out the areas which they will relinquish. Of course perhaps this is the name of the game in oil exploration. But in the overall picture it means that companies have been excluded from these areas because of the size of the original permits. The development is far too slow. The needs of Australia in crude oil and petroleum requirements are such that exploration and the discovery of new oil fields is quite urgent. The report is a massive document. No doubt a tremendous amount of work and research was put into it.

Debate interrupted.







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