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Tuesday, 11 May 1920

Sir EGBERT BEST (KOOYONG, VICTORIA) - The number of men to be employed must depend on the quantity of oil to be refined. A highly skilled technical staff must be associated with the industry.

Mr Considine - Is not that so with all modern industries ?

Sir ROBERT BEST - No. Without a highly trained staff to direct operations, the prospect of establishing the oil refining industry here is remote. Therefore it is obvious that Parliament should' give all the encouragement it can to private enterprise as in this case. Of course, there are limits which we should not exceed, and the obligation and responsibility is cast upon us of carefully scrutinizing the agreement put before us for our approval. I am in sympathy with the objection that we have not been given sufficient information to enable us to properly consider the measure, and before we can be expected to come to a decision on its important clauses we should be supplied with much more information than has up to now been placed at our disposal. We must con sider, too-, in dealing with the Bill, the agreement which has been entered into between the Imperial and Commonwealth Governments, and which we have not yet seen, because to the Anglo-Persian Corporation and its experts has been committed the duty of exploring the oil-fields of Papua and other places.

Mr Riley - There is nothing, in -tha agreement about Papua.

Sir ROBERT BEST - But it must be borne in mind that the Anglo-Persian Oil Company has been engaged to carry out exploration work 'there under an agreement between the Imperial and Commonwealth Governments. This is purely a refinery agreement, and has not the slightest connexion with the exploration agreement ; but in considering it we must bear in mind the duties which, under the previous agreement, are to be performed by the skilled experts of the AngloPersian Oil Company.

My chief objection to this agreement with the Anglo-Persian Oil Company is that if it should prove more profitable to the company to. import its own crude oil the chances of the early and vigorous exploration and development of our own oil-fields in Papua or elsewhere are discounted; and When I remember that under the terms of the agreement all the producers' profits and those derived from the freightage of the crude oil imported into the Commonwealth,' together with a proportion of the profits made by the refinery, belong to the Anglo-Persian Oil Company, I perceive that the chance of developing our own oil-fields is all the more remote.

Mr CORSER (WIDE BAY, QUEENSLAND) - We could send our own vessels to bring the oil here.

Sir ROBERT BEST - Tank vessels are required, and we have none. The corporation will be entitled to bring the crude oil to Australia, and under this agreement they are obliged to supply 200,000 tons per annum.. But what I want cleared away is my fear that this agreement in ay retard the rapid and effective exploration of our own oilfields.

Mr Atkinson - I presume that the chief expert in the exploration field will be a Commonwealth officer.

Sir ROBERT BEST - Not at all. We are told that there is an agreement in existence between the British Government and the Commonwealth Government - we have not seen it yet - and that the Anglo-Persian Oil Company are responsible for the conduct of that exploration.

Mr Atkinson - But could not the Commonwealth representative act in conjunction with their expert?

Sir ROBERT BEST - I have already explained that it is only highly skilled technical men who are capable of conducting this work.

We are entitled to know whether this company is to have an exclusive right" in regard to exploration for oil. My anxiety is to see the field thrown open to all companies, and particularly to British companies, because we want to find oil in Australia or its territories. If we find it in sufficient quantities, its commercial value will be inestimable. I have nothing to urge against the Anglo-Persian Oil Company, and I do not attribute any mala fides to them, but I urge that ordinary business precautions should bs observed. The Auglo-Persian Oil Company should not have an uncontrolled discretion which may be exercised in its own interest. While giving them every encouragement, we should also give encouragement to every enterprising oil company that is prepared to conduct explorations for oil in Australia, and then come to terms with it.

Mr Richard Foster - An Australian oil company was formed the other day.

Mr JAMES PAGE (MARANOA, QUEENSLAND) - This Bill will cut them out.

Sir ROBERT BEST - That is just the point I am emphasizing. This Bill may seriously retard the exploration and development of our own oil-fields. It is claimed that we are giving this company a monopoly; but our ultimate protection in this regard lies in the fact that at the end of fifteen years the whole enterprise may be taken over by the Commonwealth; and if by that time the refinery has been made a commercial success, and we have had the good fortune to get our own oil-fields developed, I think we are justified in paying for that success by a degree of concession to these people who are spending their own capital with that object in view.

Mr Considine - But suppose it is not in their interest to develop our oilfields?

Sir ROBERT BEST - I want, if possible, to make it their interest to do so; but I am afraid that the Bill rather tends to discourage the . development of our own fields. However, to some extent, a monopoly for a period of fifteen years may be justified.

The Leader of the Opposition (Mr. Tudor) has commented strongly upon several of the clauses of the agreement, among others the provision that, in order to insure the full success and development of the oil refining industry in Australia, the Commonwealth will exercise, or cause to be exercised, such statutory and administrative powers as ft deems advisable to prevent dumping and unfair competition, and will refund any Customs duty paid on crude mineral oi! purchased for the Oil Company, and imported into Australia, but he omitted to make reference to the words of the clause which govern these sub-clauses. The clause provides that " in order to insure the full success and development of the oil refining industry in Australia, the Common wealth " - I emphasize these words - "will so long -as the prices charged by the Refinery Company for products of refining are considered by the Commonwealth fair and reasonable" give the relief mentioned by the Leader of the Opposition. It is only when the Commonwealth Government comes to the conclusion that the Refinery Company is charging fair and reasonable prices that it will be open to it to relieve the company of Customs duties, and protect it against dumping. However, this is a provision which is capable of abuse, and further safeguards should be inserted.

The Leader of the Opposition also made persistent reference to the price to be charged. The provision in the agreement is that "the price, payable by the Refinery Company to the Commonwealth and to the Oil Company respectively for indigenous oil, and for crude mineral oil, shall from time to time be fixed by agreement between the Commonwealth and the Oil Company, and shall be based upon the contents of the oil." In my opinion, this clause is very vaguely drawn. I can quite understand what is in the mind of the Leader of the Opposition. He would say that the company would definitely fix their price at, say, 5s. per gallon, and the Commonwealth Government would reply that the oil was only worth 2s. 6d. per gallon. The company will insist upon being paid the higher price and an impasse is at once created. No basis for arriving at a fair price is provided, as, for instance, that due regard must be had to the current market rates, and no limitation of prices is prescribed. The answer to that argument is, of course, that the Bill includes an arbitration clause, which may, with a certain amendment, effectively dispose of my objection. My point, however, is that the clause itself should lay down some basis upon which the price can be arrived at. We should not leave it to the company on the one hand to say, "I insist upon a certain price," and for the Commonwealth Government upon the other hand to say, "We shall not pay it." That is not a business way of arriving at a fair price. Parliament is placing itself in the hands of the arbitrator in this connexion; he will be at liberty to do exactly as he pleases, and it will be he who will ultimately fix the price.

The agreement provides that the Commonwealth, shall supply to the refinery company indigenous oil to the . quantity of 200,000 tons per annum. I desire to call the attention of the House to an important feature affecting the price to be paid for the oil. The oil will probably be brought from the Persian Gulf in tank steamers belonging to the oil company, and for such vessels there will be, and indeed can be, no back loading. Therefore the freight on the oil from the Persian Gulf to Australia must be high enough to cover the double journey, and that must have its influence upon the price to be paid by the refinery company for the oil. It is provided that the freight shall be fixed at the current rates, but there can be no current rates for voyages of that' kind. Therefore it will be within the power of the corporation to impose very heavy charges for freight, and there will be no means of saying whether they are fair and reasonable, but regard will have to be paid to them in fixing the price to be paid for the commodity.

There is another important aspect: I was informed by an expert to whom I was speaking yesterday that in the refining of crude oil there is an absolute waste equivalent to about 15 per cent., representing on the total of 200,000 tons per annum an annual loss of approximately 31,000 tons.

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