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Wednesday, 11 August 2004
Page: 2126


Mr FITZGIBBON (6:25 PM) —The Customs Tariff Amendment (Oil, Gas and Other Measures) Bill 2004 addresses three separate issues. The first relates to extending duty free provisions relating to goods for oil and gas exploration and production activities. The second is a technical amendment to bring country codes into line with the international standard under the Customs Act. The third will impose an upper limit for alcohol content in grape wine to ensure consistency between the tariff for imported wine and the excise regime for domestically produced wine.

With respect to the first issue, item 22 of the tariff currently allows for the duty-free entry of goods for use in exploration or development activities in the oil and gas industries to the wellhead stage, except when substitutable goods are produced or capable of being produced in Australia.

I remind the House that it was this provision which caused the opposition some concern during the debate on the international unitisation agreement for the Greater Sunrise field in the Timor Sea. I am delighted that these provisions give me an opportunity to say that no-one could be more pleased than me that today, during a joint press conference with Minister Horta, Minister Downer expressed a preparedness to take a far more cooperative and friendly approach to negotiations over revenues from oil and gas developments in the Timor Sea. It was apparent to everyone that the bullying tactics adopted earlier by Minister Downer were not enhancing those negotiations and taking them forward, and we are delighted that he has changed his tune and is prepared to be more accommodating and to take a friendlier approach to those negotiations. Hopefully, this means that the Sunrise project is back on track and we will get an outcome in terms of those negotiations, the successful conclusion of which will have enormous economic and social benefit to both Australia and East Timor.

The new item 22 will accommodate changes in technology and extend the coverage to include re-entering an existing well, extending a well into a new oil or gas zone, and workovers for the maintenance of a well. This will be specified in the by-law under the new item 22. The changes will clarify an area which has been of considerable confusion for some time in the sense that the same goods and equipment used in exploration and development are also used in workover wells. Yet only some wells have been eligible for duty-free entry of goods under circumstances where those goods are not available in Australia.

One example of the confusion created is that service companies using the concession could not always be sure at the time of entry exactly what type of well the goods and equipment would be used in. This would depend on future client needs and work sequencing. After the event, such companies could be exposed to audit and recovery of duty despite no mal-intent at the time of entry. To not allow item 22 to apply to workover wells would be inconsistent and discourage the drilling of these wells, which are aimed at maximising oil and gas recovery.

At a time when oil is being consumed three times faster than it is being discovered and petrol, diesel and LPG prices continue to rise, maximising oilfield recovery should be a key public policy objective. Australia's dependence on imported oil is fast approaching 60 per cent, exposing Australia and Australian consumers more and more to the whims of OPEC and, of course, to growing instability in the Middle East. This is an issue of great concern to the Australian community but one which the Howard government dismisses as a nonevent, saying in its energy white paper:

The level of security in transport fuels is not currently under threat.

Labor in government will be absolutely committed to lifting Australia's self-sufficiency.

The question has to be asked: when are we going to wake up? We have an enormous abundance of natural gas and coal reserves which can easily be transformed into liquid transport fuels. The technology is there. The only doubt in recent years has been the economic viability of such projects, but, with oil prices going through $US40 a barrel, there is no doubt that these are commercial projects. What is required is some leadership and some vision from the Commonwealth and some encouragement to the many market participants who have a role to play in the development of those resources. We are doing some great things in terms of LNG exports and opening up new markets. Similarly we must start to focus not only on domestic opportunities but on our domestic needs. We cannot continue to allow our dependency on imported oil to grow at the rate that it is growing currently.

In terms of maximising oilfield recovery in Australia, we would want to make workovers as attractive as possible and not penalise them with duty in circumstances where the equipment is simply not available in Australia. At the end of a field's life, operations are driven by marginal costs: as costs go up, less oil will ultimately be recovered. The public policy objective should be to get the last drop of oil out of every field and not to waste this valuable and finite resource. Failure to provide the right conditions to maximise recovery will result in lower tax receipts to government on behalf of the community and lower returns to project developers. Therefore Labor fully supports this amendment to the tariff.

The second issue, as I said earlier, is a technical amendment to bring country codes used in the tariff into line with international standards. The change will insert `PL' as the country code for Poland and `XC' as the country code for Wake Island. The change has no effect on customs duty applicable to goods from either country and is supported by Labor. The third measure aligns the customs duty with the excise regime for grape wine. Additional note 3(a) to chapter 22 in schedule 3 of the tariff will be amended to insert a 22 per cent upper limit on alcohol content of grape wine—defined by the note. This amendment will ensure that imported grape wine with a higher alcohol content than 22 per cent will attract a rate of customs duty equal to the excise on locally manufactured wine with that alcohol content. Labor supports the bill and commends the amendments to the House.