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Wednesday, 27 March 1968

Mr FAIRBAIRN (Farrer) (Minister for National Development) - Naturally, the Government does not accept the Opposition's amendment.

Mr Peters - Why 'naturally'?

Mr FAIRBAIRN - I shall tell the honourable member if he would like to wait. This is only a very minor Bill which is designed to make a couple of completely minor alterations to a Bill which was debated at great length and was carried by a large majority of this House just before we rose at the end of the last session. The Bill is designed to do two things: Firstly, it corrects a drafting mistake. Section 146 of the principal Act refers to section 43 of the Act instead of section 44. Probably we would not have worried about this amendment if it had not been for the fact that a Bill was to be introduced anyway.

Mr Connor - The Act would not be operative until the amendment was made. It would be nugatory completely.

Mr FAIRBAIRN - This was purely a drafting error at the time. The other amendment is necessary because of a different setup in the Ministry. The Minister for the Interior (Mr Nixon) is the Minister in charge of the Northern Territory. He now becomes the designated authority in tha

Northern Territory. The Minister for External Territories (Mr Barnes), who was formerly called the Minister for Territories, becomes the designated authority for Papua and New Guinea. These are two completely minor amendment* and I should have thought that the Opposition would have accepted them. But, of course, while these minor amendments are being made the Opposition has chosen to jump on the bandwagon and to try to re-open the whole discussion on the Bill.

I regret that because of an important engagement in my office 1 was not able to hear everything that was said by the honourable member for Cunningham (Mr Connor) who led for the Opposition in this debate. But I did hear enough to make me realise that all he was doing was canvassing the arguments which he put forward unsuccessfully about 4 months ago. But let me get down to the point. I think that I can clear the matter up for the honourable member for Cunningham.

The honourable member's main point is that there have been gigantic discoveries of oil in Australia. 1 would not go quite so far as to say they are gigantic. There is no doubt that they are exciting and magnificent for the future of Australia. But recently I discussed this question of the discovery of oil with a principal of one of the companies involved in this work. I said: 'Is this a major oil field by world standards?' He said: There is no doubt that it is a reasonably good field but by comparison with some of the fields in the Middle East it is only a pimple.' He referred to one field which had reserves probably twenty-nine times the reserves of the largest field now known in Gippsland.

Dr Patterson - It is still pretty good.

Mr FAIRBAIRN - It is still very significant, and we are particularly glad to have found the oil. Of course, if it had not been for the Government's fuel policy the oil would not have been found. It has been our policy to carry out geophysical mapping in order to encourage people to come in and search for oil. We are giving exploration assistance by way of subsidies for drilling. There is also the subsidy which was referred to by the Opposition as a production subsidy. Tn actual fact, it is an encouragement for prospecting. The oil search companies know that if they discover oil, firstly, it must be taken in Australia because there is a penal tariff which prevents other oil coming in until the Australian oil is taken; and secondly, they know that they will get slightly better than the world price for the oil in order to enable them to put money back into further exploration.

Oil in the Middle East sells at an amazingly low price. If we want to be dependent on the Middle East for oil for the rest of our lives, all we have to do is to give no assistance for exploration and search in Australia. We will get cheap oil so long as we can continue to get it out from the Middle East. Literally, some of these enormous Middle East fields have been amortised, and all you have to do is turn on a tap and out comes the oil. You can get the oil here in mammoth tankers, and you can get it here cheaper than we can produce it locally. But I, for one, do not want to see us dependent forever on oil from the Middle East. Not so long ago, during the Suez crisis, we were considerably worried as to whether Australia would continue to have an availability of crude oil which is so necessary for our industries. I would not say that we were lying awake at night, but we were certainly concerned and every day we watched the figures for tankers on the sea to see whether there was sufficient oil available.

Now we have struck oil in Australia. The Opposition is now taking the view that it always adopts. When a thing is not profitable the Opposition says: 'Do not worry about it at all. It is private enterprise, and it will look after itself.' But the moment something becomes profitable, the Opposition says: 'The horse has cleared out and it will be first past the post. For heavens sake, let us get some money on it before it wins.' The Opposition cannot have it both ways.

We have succeeded in discovering a vast quantity of oil. We are glad to see that the company which has taken enormous risks is suceeding and will do very well financially out of it. But not only will the company do well, Australia will also do well. A considerable part of the profits will come to the Government in the first instance through taxation. The company has put the figure at 50% of the profits. but 1 think that is a little high. Australia will undoubtedly get a magnificent taxation return and our expenditure on the importation of crude oil will bc substantially reduced. My Department has estimated that by the end of 1970, when the known Gippsland fields will be in full production and with the Barrow and Moonie fields continuing to produce, even without any further discoveries we will be able to supply more than 60% of our oil requirements. This will mean a saving on our imports of $240m per annum. Surely such a result as this shows that it is worth encouraging companies to search for oil. One company has been lucky and has met with success.

But West Australian Petroleum Ltd spent 13 years and $50m from the time of its first oil strike until its second oil strike. Vast risks are taken. If the companies are lucky, the risks pay off; if they are nol, large sums of money are lost.

Let me get back to the point that the honourable member for Cunningham raised about the price. The Government is not asleep. It realises that it has encouraged the exploration for oil. When only a very small quantity of local crude oil was produced, the price was not affected very much. The price in Australia is one of the lowest in the world. I think it is the next lowest after America. The effect on the price is absolutely minimal when we are producing only 5% or 6% of our requirements and paying 75c a barrel more for local crude. In fact, the figure was probably more, say about 90c, because it was 75c above the posted price and discounts were applied to the posted price. Even with a large increase in production, as there will be by mid 1970, the price of petrol will still not increase substantially. It is a little like the price of a suit of wool. It seems to me that, whatever price is paid for the wool, no difference is made to the price ultimately paid for the suit. This would also apply to some extent to oil. We could certainly say that the difference in the price of oil would be of the order of lc or He, even when Australian production increases considerably.

The Government has been concerned about this problem for some time. It has already appointed a very well known international expert, Dr Frankel, and has brought him out here from the United Kingdom at Government expense. He has already seen a number of the companies and has had discussions with them. He has bad discussions with officers of the Fuel Branch of my Department and with the Secretary and other officers of the Department. Four Departments are interested in oil production. They are the Departments of National Development, Trade and Industry, Customs and Excise and Treasury. The problems are already being discussed. Obviously the Government must make a decision in the not too distant future as to what it will do, but it is quite unnecessary to amend the Bill that is now before us. The Government realises that action must be taken, but it believes that the explorer must be assisted. It is all very well to say that we are likely to produce 60% of our requirements, but this is only for 1 year. If no further discoveries are made, the percentage will go down. Our consumption of crude oil is increasing at the rate of 9% or 10% per annum. We need further discoveries of oil to keep pace with increasing consumption and we must keep spending vast sums of money.

We should congratulate Esso-BHP on the way it has undertaken the task of searching for oil. Broken Hill Pty Co. Ltd originally obtained the rights to an area but realised that it did not have the technical knowledge to carry out the search effectively. We cannot blame the company for taking that attitude. The search for oil is one of the most difficult exercises that can be undertaken. Drilling has been commenced at the Prawn field and the rig is 320 feet above the sea bed. This is an enormous distance. 1 believe that I am right in saying that this is the greatest depth at which drilling has been attempted in any part of the world. At the Halibut field, the pipes will have to go deeper than any pipes have yet been laid under water. All this calls for vast expenditure and the companies must have some guarantee of a reasonable price and a complete guarantee that the licences and leases will be fully supported both by the State and the Commonwealth. For these reasons the Government does not accept the amendment.

Question put:

That the clause proposed to be omitted (Mr Connor's amendment) stand part of the Bill.

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