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Thursday, 12 April 1973
Page: 1418

Mr JACOBI (Hawker) - The statement of the Minister for Minerals and Energy (Mr Connor) clearly sets out the Government's policy, and I believe that it may be summarised as follows: Firstly, a majority Australian control over both equity and policy of our resources development; secondly, the coordination of a national fuel and energy policy; thirdly, regulated exploration, development, transportation and marketing of oil, natural gas or related hydrocarbons; fourthly, recognition that petroleum is a finite mineral resource; fifthly, the need for a fuel and energy budget; sixthly, recognition that adequate dependable low cost supplies are crucial to this nation's progress and security; and seventhly, the imperative need to recognise that control of and responsibility for our national fuel and energy resources must be exercised by a national government and not left to the whim of private individuals or companies whose basic motivating force is private profit and gain.

Might I at this juncture make 2 comparatively crucial assessments to which the previous Government refused to face up. One is the overt pressure and power being exercised by multi-national corporations on national governments or sovereign States, and the second is the world energy crisis. In my humble opinion these 2 basic assessments will prove the most formidable problems that will face national governments in the very near future. What is the position facing this country at the moment in terms of its reserves and in terms of its control? Just how crucial is it to have a totally balanced evaluation of fuel and energy resources? Australian and world demand, current and projected, clearly indicates ominous signs of a world fuel crisis. Throughout the leading petroleum consuming countries consumption of energy has been growing at from 3 to 5 times the rate of population increase. What is Australia's position insofar as oil is concerned? I have said this previously and I will repeat it: On present known reserves, by the year 1983-84 we will be producing 50 million barrels per annum. We will consume some 410 million barrels per annum. In effect we will have one-eighth of our requirements by way of known reserves. Based on the world parity price of $2.60 a barrel at 350 million barrels c.i.f., this would mean an annual cost burden to this nation of $1.5 billion. In relation to the question of Australian governmental expenditure and private finance, I seek leave to have incorporated in Hansard a table which clearly sets out that Government expenditure plus Australian private funds as a proportion of the total funds for petroleum exploration, development and production in 1971 constituted 58 per cent.

Mr DEPUTY SPEAKER (Mr Duthie - Is leave granted? There being no objection, leave is granted. (The document read as follows) -


Mr JACOBI - Let me turn to the question of natural gas. Reserves have been estimated at between 70 trillion and 100 trillion cubic feet. Let me turn to the crucial question of equity participation and control. I shall deal today only with the 2 basic areas - Palm Valley and the northwest shelf. Palm Valley has an estimated 10 trillion cubic feet. Let us have a look at who controls this. Magellan Petroleum Australia has 43.33 per cent, Magellan Petroleum (United States) 13.54 per cent, United Canso Oil Ltd (Canada) 24.38 per cent, Freeport of Australia Incorporated (United States) and Flinders Petroleum NL 9.375 per cent each. In turn, Magellan Australia is owned 54.1 per cent by Magellan Petroleum Corporation of the United States, 21.1 per cent by Partepec International Incorporated of Bermuda and the balance by the Australian public. This is the company which in fact has signed an agreement with Pacific Lighting Corporation of Los Angeles to supply and export 500 million cubic feet a day to the western seaboard of the United States, subject of course to the Australian Government's approval to export liquefied natural gas from Palm Valley. In my view it is a deplorable situation that this field is almost totally controlled by overseas multi-national corporations.

I turn to the northwest shelf. WoodsideBurmah, together with British Petroleum, Shell and California Asiatic holds leases totalling some 143,000 square miles. It is beyond question - and I disagree with the previous speaker - the largest gas off-shore provinces in the world, an area larger than the British Isles or the British sector of the North Sea or the entire concessions in the Gulf of Mexico. Just how is this vast hydrocarbon basin carved up. It reads like a 'Who's Who' of the multi-national corporations. WoodsideBurmah is 54.5 per cent owned by Burmah Oil of London. The remaining interest is held by Shell, British Petroleum and California Asiatic with 161 per cent interest each. I am firmly of the opinion that the resignation of Mr Withers, formerly Managing Director of Woodside-Burmah, on 20th October last stemmed directly from a bitter division over the need to disclose the estimated northwest shelf natural gas reserves. It is a fact that he is one of the 5 who, out of the 9 members who constitute the Woodside-Burmah Board, are Burmah supporters. They have deliberately refused to reveal the current estimated reserves.

I am further convinced that the northwest shelf reserves are immense. My guestimate is that they are between 60 trillion and 100 trillion cubic feet gross. However a minority faction, and Mr Withers was one of them, was conscious of this simple fact that WoodsideBurmah shares had declined significantly already on the stock exchanges. As a consequence they were passing rapidly from Australian ownership at a low or depressed price. I want to quote from the Kit Kat Aitken report which was the only report I could find up to October last year which had made a balanced evaluation of the northwest shelf. This is what the report had to say.

We only gave our forecast below for the sake of interest and to demonstrate that, even with the information available, the operation appears fully viable and the shares substantially undervalued.

The consequence of the deliberate and calculated overt pressure applied by overseas interests is blatantly obvious as a tactic. It is a fact that Woodside-Burmah shares had declined and had been swallowed up by nominee share transactions to a level where overseas control on the northwest shelf is now estimated to be 87.7 per cent. In effect Australian equity in that vast holding is 12.3 per cent. It is scandalous that the density of foreign control has been achieved by nominee share transactions about which the previous Government did nothing. But added to that, and to compound it, of the 20,500 square miles which was farmed in under an arrangement reached through the connivance of Woodside-Burmah-

Mr Viner - What do you mean 'connivance'?

Mr JACOBI - It was up to Woodside Burmah to call for tenders. Out of the 9 companies that applied and were granted farm-out arrangements only one was an Australian corporation, Hermatite Petroleum Pty Ltd, a subsidiary of Broken Hill Pty Co. Ltd. Let us put the field in its proper perspective, as I understand it. I have noticed Press reports estimating that there are some 9,000 million barrels of crude and condensate on the northwest shelf. This would have a value of approximately $2.6 billion. However, the estimated 60 trillion cubic feet - my guesstimate - of natural gas is valued in national terms at $25 billion, twice the entire national budget. It would supply more than enough to support a major liquefied natural gas or methanol export project, presumably the export of methanol to the United States of America and liquefied natural gas to Japan. It would also supply the Pilbara steel and mineral development project and leave enough for general use elsewhere in this country. These assets which are the envy of the developed countries could not have been more effectively or efficiently plundered if this country were a vassal of a conquering foreign army. It is the result of the previous Government's open gate and soft approach to multinational corporations.

Why has the density of foreign control become so high in these 2 areas? I can recall being scoffed at and ridiculed when I asserted last year that we could get to the stage of exporting liquefied natural gas and rather than getting 16c a thousand cubic feet, which is the gate price paid from Gidgealpa to Adelaide it could rise to as high at $1.25 a thousand cubic feet. We are fully conscious of the pressure which was placed by the multi-national corporations on the previous Government and on this Government over the granting of export licences whether to Japan or the United States. Already Shell receives 80c a thousand cubic feet for its gas from Brunei landed in Japan. It is estimated by reputable bodies in the United States that the United States will pay a price of between $1 and $1.25 a thousand cubic feet. Already the United States is paying between 95c and 98c a thousand cubic feet for Algerian gas landed on the eastern seaboard of the United States. It needs little imagination to assess the huge profits which would be taken out of this country by multi-national corporations had export licences been granted to either of the corporations operating at Palm Valley or the northwest shelf.

My Government's policy is deliberately and constructively geared so that any profits obtained from this source will be exploited only on the basis that it is in the national interest and that any profit from such exploitation will be maximised at world parity prices and will be for the national good and not for the profits of individual companies or multi-national corporations.

Just how crucial is the need for national control and a balanced evaluation of our resources? The previous Government, in its usual slavish policy of following the dictates of the United States, was rapidly exploiting our resources - fuel and energy - on exactly the same lines as the United States and it would have been equally as disastrous to this country as it has been to the United States. Let me quote briefly from a report by the Chase Manhattan Bank which ought to bring home to the Opposition just now crucial the situation is in the United States. The Bank's energy economics report stated:

The United States is not going to be able to afford to fill its energy gap requirements between now and 1985 completely by imports. It is now obvious that the United States is faced with a very serious situation in respect of energy supply. And unless positive corrective actions are taken immediately the problem will become critical.

If the United States is forced to import amounts of oil and gas necessary to meet its full requirements, the necessary outflow by 1985 is likely to be in excess of $30 billion a year, compared with about 34 billion at the present time.

In no sense would it be realistic to expect that the outflow of dollars would be offset by a corresponding inflow. The annual balance of payments deficit alone could be as much as $25 billion; a deficit the nation could not tolerate.

If one wants to put it in more cogent terms, the United States currently imports 23 per cent of its oil requirements. By 1982 it will be forced to import 50 per cent and by 1992, 75 per cent. If one takes the figures of $US4 a barrel and $US6 a barrel, by 1982 and 1992 the American people will be up for an annual cost burden of between$US16 billion and$US48 billion. I put it quite seriously to this House that the world wide fuel and energy crisis, the role which has been played by those countries which control these vast non-renewable resources, the role being played by the multi-national corporations and the effects which they have on national governments in Western Europe, Japan and the United States, are crucial to world stability and peace. I quote now an extract from a report recently handed down by the Institute of Strategic Studies. It said:

The world contains 'proven reserves' of crude oil estimated at about 90,000 million metric tons. Of this, over 50,000 million tons are in the area of the Middle East (which here includes North Africa). (Extension of time granted).

The report continues:

Middle East oil is cheap: the capital investment required to produce one barrel per day there has varied from $120 to $265, whereas North Sea costs have been estimated at $2,500 per b/d. The world now consumes approximately 2,500 million tons of oil a year. Of this, almost 1,000 million tons comes from the Middle East. Table 1 shows that while West European and Japanese dependence on Middle East oil is already very large, that of the United States is relatively insignificant. It has been estimated, however, that, with the growth of energy demand and the exhaustion of domestic natural gas reserves, the United States may require 1,100-1,200 million tons of oil in 1980 and 1,250-1,500 million tons in 1985, and that domestic production is unlikely to exceed 600 million tons in the former year or 720 million tons in the latter. In 1980, therefore, American oil imports might be some 550 million tons, possibly rising to over 700 million in 1985. The Middle East will presumably supply a high percentage of this, with cautious estimates of 1985 imports from that source ranging between 500 and 600 million tons. In that same year, Western Europe may require up to 1,100 million tons of imported oil and Japan up to 600 million tons, with the bulk of that also expected to come from the Middle East

This is the crucial part -

In order to satisfy demand, Middle Eastern production might have to rise from 972 million tons in 1971 to something like 2,500 million tons in 1985. In return, Middle Eastern governments would then be receiving an estimated annual income from oil exported to the United States, Western Europe and Japan alone of up to $40,000m a year, forcing them to become substantial partners in the international financial system. It would be unwise to assume that all these expectations will prove justified. Many are based on simple extrapolations of recent trends, and are vulnerable to the fluctuation of economic growth rates, the deliberate energy policies of governments, changes in the relative prices of primary energy sources and the unpredioted development of non-oil sources. Nevertheless, it is such projections which form the basis for current policy decision by producing and consuming countries and by the oil industry itself. That, in the crudest terms, is why the politics and economics of oil have become the most important issue in Middle Eastern affairs and in the future relationship between Middle Eastern oil-producing (and oil-transporting) countries and the large consuming markets of the developed world. The events of 1972 offered the clearest illustration yet of the pattern which is evolving.

The point I make is that Western Europe, Japan and the United States are becoming almost entirely reliant on the MiddleEast. Imagine an amount of $40 billion going to Middle Eastern countries. Once that amount starts to gravitate in the international markets of the world it will become a problem in terms of stability in international monetary markets. I mentioned the movement of the multi-national corporations. It is the movement of large volumes of money at this level gravitating through the international markets that is causing the instability. I vividly recall some 3 years ago the Labour Prime Minister of Great Britain claiming that the gnomes of Zurich had been responsible for the devaluation of sterling at that time when basically devaluation was caused by the multi-national corporations.

In summary, I think it is fundamentally crucial that this country should not be placed in an identical situation to that which now faces the United States. Its national fuel and energy policy has been left entirely to the dictates of the multi-national corporations which have no responsibility to the United States or to any other country. They are concerned only about machinating around the world and increasing their profits from one country to another. We should not be placed in that vulnerable situation. Japan is in such a situation at the moment and it has had to diversify from the Middle East. It wants rapport with China or Russia to get high grade coking coal and crude oil. Personally I am proud to support the Minister's statement and our Government's policy objectives. They are 23 years out of date. They ought to have been initiated after the Second World War because anybody who had studied this subject at all could have predicted that in regard to resources the world is rapidly developing polarisation of instability. I sincerely trust that in the years to come this polarisation will not take place. I hope that there will be international rationalisation of distribution of resources because if this is not achieved there will be conflicts and possibly war. My Government's policies are constructively geared to regulate and control our vast non-renewable fuel and energy resources to ensure that such exploitation is in the national interest. This whole area of fuel and energy is the one basic area where beyond question control must be exercised in the national interest in terms of our future progress and security. That progress and security can only be safeguarded and protected by a national government. I commend the Minister and congratulate the Government for its positive policy and its timely initiative.

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