In for the long haul

Here’s some numbers to give pause for thought: when the 2,600 registrants at the 2015 Australian Petroleum Production & Exploration Association conference gather in Melbourne this weekend, the industry will also be marking a momentous 50th anniversary – the 1965 discovery of a field in Bass Strait, dubbed Barracouta, that initiated delivery in to the domestic market from offshore Gippsland of some 9,000 petajoules of gas in aggregate to date.

(To put this in context, Victoria consumes about 250 PJ of gas a year and New South Wales about 150 PJ.)

Add to this the four billion barrels of crude oil the ExxonMobil/BHP Billiton joint venture has recovered from the Strait over this half-century and you have not only a river of gold for the companies and their shareholders but also, in today’s dollar values, somewhere in excess of $300 billion in federal government revenue from direct taxation.

This is a phenomenal return on an exploration punt in the wild waters of the Strait undertaken when Robert Menzies was still Prime Minister and Bobby Simpson was captain of the Australian cricket team – with the discovery made in the year before we changed to decimal currency.

And Bass Strait petroleum’s days are far from over.

The area is expected to continue to deliver oil and gas through the ‘Twenties, with economics dictating the extent to which resources at greater depths can be exploited.

Geoscience Australia reckons that just over half the available gas resources of the Gippsland Basin have been extracted since production began 46 years ago.

The joint venturers are engaged at present in a $335 million search in Bass Strait for new gas resources to extend the reach of the $4.5 billion Kipper Tuna Turrum development that was commissioned in 2013.

Needless to say, the hard-nosed mob at the APPEA conference will be focused on today and tomorrow and not the distant yesterday of the anniversary.

Acting APPEA chief executive Paul Fennelly – the new CEO, Malcolm Roberts, will take up the post in mid-year – rightly makes the point (in the association’s magazine, now on its website) that Australians, and especially policymakers, will be mugs if they take for granted the prosperity delivered from the domestic and export oil and gas business (and from iron ore and coal operations) at a time when falling prices in global markets are the bane of all investors and planners.

Companies, Fennelly says, are focused on reducing costs, seeking more opportunities for collaboration and investing in technologies that can make them more efficient, but governments have a lot of lifting to do, too.

It’s a fair bet that, in the wake of the large-scale take-over of BG Gas by Royal Dutch Shell, still to be finalized, the cavernous Melbourne Convention Centre will buzz over this week with gossip about what other M&As, albeit on a considerably smaller scale, are in prospect in Australia.

But the business of the conference – in a score of plenary presentations and almost five score business and technical papers in concurrent sessions – will concentrate on the challenges of corporate efficiency and, equally, the task of persuading governments, federal, State and Territory, to play their part in ongoing petroleum development on a higher plane than hitherto.

Fennelly writes that “now is the time to redouble efforts to remove red tape and to make regulation a competitive advantage rather than a burden.”

He asserts that the present situation is increasing the running costs of existing operations, pushing up project building costs and deterring new investment.

High on the list of what APPEA and its members want is that the governments of Victoria and New South Wales should each get their act together on the issue of gas exploration and development.

Activism in the two States and “unfounded fear campaigns,” Fennelly comments, have over-ridden good policy.

Of course, the issues go well beyond the domestic implications of the gas business in NSW and Victoria.

A big ticket issue for the scores of journalists who come to the APPEA conference will be as much the prospects for further LNG developments as the challenges for joint venturers completing the current crop – which will enable Australia to claim the mantle of leading global energy trader.

The extra-ordinary scale and scope of the current efforts to deliver 13 new LNG trains around the country between now and 2018 tends to be lost to view to Mr and Ms Average in their lounge rooms around the country – because, when petroleum is getting any attention beyond the petrol price, the stuff of night-time TV news is banner-waving, chanting anti-fossil fuel campaigners or politicians on the make rather than the massive activity taking place far out of sight of the capital cities.

Sometimes, too, it is manufacturers on the make and their lobbyists, still kicking the gas reservation can no matter how often they are told it’s a dumb idea.

Fortunately, it seems a growing number of factory owners appreciate that bringing more and more gas to market is the better way to go – but this obvious point is in constant head-butting mode today with the anti-fossil fuel brigade (who have proved adept at working rural communities to suit their purposes).

A key issue for the investors, whether gas producers or major users, is policy made for the long term.

As the Bass Strait activities demonstrate, oil and gas developments have long lifespans.

The oldest Australian LNG venture, the North-West Shelf project, shipped its first cargo 26 years ago and Woodside and its partners are now looking at how they can extend it for another 20 years.

Some of the projects now being developed or just entering production are also expected to have lives of at least 30 years, contributing decades of tax revenue for governments, billions of dollars in income for suppliers of goods and services, thousands of jobs and, of course, profits for their investors unless the wheels fall off the policy and regulatory cart.

Every lobbyist knows that getting today’s policymakers to have a long-term focus rather than on the 24/7 news cycle or reacting to opinion polls and running, always running, to the next poll that really matters to MPs, the next election, is proving harder all the time.

What’s needed, argues Fennelly, is smart thinking by both companies and governments.

The APPEA conference offers the association and its members the opportunity to showcase both what they believe smart thinking should be and, through a 12,000 square metre exhibition, the wide-ranging benefits that can accrue from it.

The event also offers some political leaders – federal Industry Minister Ian Macfarlane, his Labor “shadow,” Gary Gray and Victorian Labor Treasurer Tim Pallas – the opportunity to set their current thinking before an audience that is not easily swayed by rhetoric.

Pallas, in particular, may feel he is in the lion’s den: his government’s decision to add to investor uncertainty by extending the moratorium on onshore gas activity, initially imposed by the pusillanimous Coalition administration it defeated last year, and to opt for a parliamentary inquiry that could drag out resolution until 2017 is highly unpopular with the petroleum industry and its stakeholders, including manufacturers.

It’s an odd look for a State that has 50 years’ experience of the community benefits gas can deliver.

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