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Wednesday, 19 April 1972
Page: 1786


Dr PATTERSON (Dawson) - The drastic decline in the rate of oil exploration activity in Australia in the past 12 months represents a serious warning to the Federal Government that Australia can face huge costs for imported petroleum products in the future. At present Australia is approximately 70 per cent self-sufficient in its crude oil requirements. Import costs are running at $190m in the last year, but although this current, relatively high level of selfsufficiency suggests a bright situation, the immediate future can be regarded as somewhat dark. If there are no further oil discoveries in Australia import costs of crude oil and petroleum products will jump to approximately S370m by 1975. By 1980 import costs could reach $650m. By 1975 it is estimated that domestic production will cover only 50 per cent of our total requirements and that by 1980 this proportion will drop to 28 per cent.

The significance of future oil imports to the Australian economy can be seen by the analysis of projected costs of all imports within the next 20 years. In the absence of any further discoveries of oil in Australia, costs of crude oil imports are estimated to amount to a total of at least $1 6.000m over the next 20-year period. These are frightening figures for imports in relation to a budget. The magnitude of this potential increase in import costs must be taken very seriously. In all probability further oil discoveries will occur, but this cannot be taken for granted. The significance of future costs of oil imports can be gauged by the estimate that to secure selfsufficiency in oil over the next 20 years Australia would have to find and develop major oil fields equal, say, to the Bass Strait wells every 2 years. If Australia is forced to pay huge import bills for crude oil in the future tremendous pressure will be exerted on our basic export industries to earn foreign exchange, and although moderate increases in manufactured goods can be expected in the future, the major burden of financing imports will have to be borne by the agricultural, livestock and mineral industries. It is therefore clear that present Government inactivity and apathy in the field of oil exploration cannot be allowed to continue.

Already the Government's inactive policies in the field of oil exploration and development are causing a serious slowing down in drilling and geophysical work. In 1971 the total footage of wells drilled dropped by 38 per cent compared with 1970. A total of 760,800 feet was drilled in 1971 as against 1.2 million feet in 1970. The decline in oil exploration activities is even more serious when it is shown that only 101 wells were drilled in 1971 compared with 212 in 1970. Although it is accepted that an important reason for the slowing down of activity is a sharp drop in drilling in onshore wells in Queensland and off-shore wells in Victoria, the fact nevertheless remains that oil exploration is sick. A major proportion of the blame for the condition of this sick industry must be borne by the Government as a direct result of unsound development policies. Despite its undoubted economic importance to the Australian economy, oil exploration has become the Cinderella of Australian developmental industry.

There is an urgent need to review the entire taxation, subsidy and domestic pricing policies with respect to the exploration and production of indigenous crude oil in Australia. A basic premise which must be accepted is that if Australia has extensive oil resources they should be found and developed to a level at least equal to selfsufficiency. It is indeed a sorry state of affairs when the Japanese Government is now financing Japanese companies to the extent of at least 50 per cent of opera tional costs to search for oil in Australian waters. In contrast, the Australian Government is paying Australian companies a maximum of 30 per cent of drilling costs in these same Australian waters.

Because of the Federal Government's miserly policy on exploration subsidies it is obvious that more and more of Australia's offshore resources will fall under the direct control of foreign interests. Australian companies just cannot afford to search for oil off-shore unless heavily backed by the Federal Government. They cannot compete, under existing policies, with the rich and powerful foreign interests now exploring our off-shore resources. Oil exploration subsidies should be looked upon as a national investment which is capable of yielding tremendous results and returns to the overall Australian economy. The soundness of increasing investment subsidies is clearly illustrated by the benefits received up to the present. A total of approximately $ 1,000m in present day money, including the oil exploration subsidy, has been invested in oil and gas exploration activities up to 1972. This investment is now yielding a cash flow in excess of $300m per annum from the production of oil. At the present import parity price this value is of the order of ยง360m. In addition some 10 million cubic feet of gas will yield at least $900m for domestic usage, in addition to substantial reserves. Because the nation has suddenly jumped to 70 per cent of self-sufficiency in oil the Government has become extraordinarily complacent. But, as pointed out, unless the present rate of exploration activity is increased self-sufficiency can disappear within a decade. In view of the need to increase domestic oil supplies in the future and the magnitude of potential benefits from investment in oil exploration, there is an urgent and justifiable need substantially to increase the exploration subsidy, particularly to Australian companies.

At the same time a Labor Government will give serious consideration to restructuring sections of the Bureau of Mineral Resources to allow the Bureau to enter the field of oil exploration and development. The establishment of a Commonwealth exploration authority would enable exploration and development of petroleum fields to be undertaken on behalf of the Australian people. Such an authority would work in close conjunction with the States and other exploration companies, both Australian and foreign. The French Government established the Bureau des Recherches du Petrole - BRP - after the last war. This Government authority has been responsible for the major part of the development of the oil industry in France and ils colonies to the great benefit of the French nation, in Italy the State owned ENI Corporation which was established in 1953 has played a major part in Italy's oil and natural gas exploration and production. In Japan oil exploration is mainly the responsibility of the Japan Petroleum Exploration Co. JAPEX is a partnership between the Japanese Government and private companies concerned with the petroleum industry. In addition to undertaking oil exploration and development in its own right a Commonwealth authority would participate by way of partnership arrangements with Australian and foreign companies in the systematic development of our nation's oil resources.

One of the principal reasons for the reduction in oil exploration activity is the Government's absurd policy with respect to the guaranteed price for domestic indigenous crude oil. The domestic price for indigenous crude oil is pegged at the import parity price prevailing as at October 1968. This price is supposed to apply to 1975. When this price was first pegged the import parity price of crude oil was significantly lower than the Australian guaranteed price. This gave the industry a decided incentive to explore for oil. But early in 197) there were substantial increases in world prices, to the degree that producers of Australian oil are now receiving prices around 20 per cent below the real import parity price. Thus despite severe inflation which has played havoc with exploration and development costs, the Government refuses to increase the price of Australian oil to at least equivalent to the non-dumped import parity price. The overall result of this negative and extraordinarily bad policy will be to drive all small Australian companies out of the oil exploration field and to hand our oil resources to the major international oil combines. If the Federal Government does not drastically change its exploration subsidy and domestic pricing policies, and aim towards a goal of self-sufficiency in oil production, Australia will become progressively at the mercy of the overseas oil companies as our oil resources will progressively diminish. The domestic price of Australian crude oil should be increased immediately to a figure equivalent to the world parity price. This price should be regarded as a floor price. This action need not necessarily mean an increase in petrol prices. Under a Labor Government an increase in the price of a basic commodity like petrol would have to be considered by a prices tribunal in which the profits of oil companies would be closely scrutinised. Alternatively increased costs of the guaranteed price of indigenous crude oil could be treated as an investment subsidy in the same way as the exploration subsidy is borne by the nation as a whole.

It is clear also that Australia must adopt policies aimed at securing progressively greater ownership of oil production, oil refineries and gasoline companies operating in Australia. At present, at least 70 per cent of oil exploration and production in Australia is in the hands of foreign interests. In the oil refining fields 90 per cent is in the hands of foreign interests. Eighty per cent of the total marketing of petroleum is in the hands of foreign interests. This does not mean that Labor is opposed to foreign investment in Australia. Labor recognises that where huge amounts of risk capital are involved, together with highly specialised technical know-how and cut-throat international competition, particularly with respect to marketing tie-ups. foreign capital is part and parcel of the development of a young nation's basic natural resources. But Labor is determined to implement positive policies that will give Australia a far greater equity in our mineral and oil resources. This will involve active participation by Commonwealth agencies in the fields of finance and resource development.

The Federal Government steadfastly refuses io undertake sound planning programmes with respect to the systematic development of Australia's natural resources. The Government refuses to provide sound exploration and development incentives for Australian companies competing with foreign interests. It refuses to enter into the oil exploration field itself or to take an active partnership with Australian or foreign oil companies for the benefit of the Australian people. The Government persists with a bad development and economic principle in allowing the price of a valuable Australian commodity, a resource which is in short supply, to be less than the world parity price. This principle would not be accepted in any other country in developing a scarce resource. These policies are collectively allowing our basic resources to fall more and more under the control of foreign interests. I submit that no other nation would tolerate such negative and un-Australian policies.

There is an urgent need to review the principles of taxation and oil exploration subsidies and the principle of foreign ownership participating in exploration and development. There is a very urgent need to have a close look at the development of oil fields in off-shore waters. Many times in this Parliament the Opposition has referred to the controversial Territorial Sea and Continental Shelf Bill. This Bill is fundamental to the development of Australia's off-shore resources. The Government stands condemned for its inactivity in this field and for its refusal to bring forward and allow the Parliament to debate and pass this controversial legislation which is fundamental to resource development in Australia. The Government could not care less about the development of Australia's basic resources for the benefit of Australians. We are seeing more and more of our basic resources being handed over on a plate to foreign interests, without any conscious policy on the part of the Government to develop these basic resources, particularly in oil and minerals, for the benefit of the Australian people.







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