696

Views

Australian Oil and Gas Industry in Free Fall

offshore

By MarEx 2016-09-07 19:01:48

This week’s release by the Australian Bureau of Statistics of petroleum exploration expenditure data for 2015-16 is an urgent wake-up call for governments and industry, says industry body APPEA Chief Executive Dr Malcolm Roberts.

He says the 2015-16 data confirms that oil and gas exploration – onshore and offshore – is in free fall.

“Over the last two years, spending on onshore and offshore exploration has fallen by almost two-thirds,” he said.

“While some of this fall reflects lower costs, exploration activity is undeniably at its lowest levels for many years. The number of exploration wells drilled offshore is at its lowest level in almost 20 years; onshore drilling is at its lowest level in 15 years.

“The latest data continues a worrying trend that has been evident for many years, even when commodity prices were much higher. If the slide in exploration continues, Australian gas users will face more uncertainty about future supply and higher gas prices.”

According to the Bureau, the seasonally adjusted estimate for total petroleum exploration expenditure fell 30.8 percent (-$131.3m) to $295.3m in the June quarter 2016. Exploration expenditure on production leases fell 4.2 percent (-$2.8m) and exploration expenditure on all other areas fell 35.6 percent (-$128.5m). The largest contributor to the decrease in the fall in the seasonally adjusted estimate was Western Australia (down 33.1 percent, -$110.5m).

The seasonally adjusted estimate for offshore petroleum exploration expenditure fell 31.0 percent ($103.7m) to $230.4m in the June quarter 2016. Expenditure on drilling fell 36.3 percent (-$92.5m) and other offshore petroleum exploration expenditure fell 14.1 percent (-$11.2m).

APPEA welcomes a Commonwealth initiative to examine exploration and development, especially focusing on frontier regions and less-explored areas that may offer significant untapped potential.

“The $100 million in new funding for Geoscience Australia, announced in the last federal budget, is also a very important initiative,” says Roberts.

“The recent Council of Australian Governments’ Energy Council meeting highlighted the urgent need to develop new gas reserves, given the likely supply shortfall in 2019. Production from the key basins in South Australia and offshore Victoria will begin to fall from 2017.

“We must find and develop new supplies of gas to offset falling output from Australia’s long-established gas fields.”