CURRENT OUTLOOK ECONOMIC ASSESSMENT OF PETROLEUM EXPLORATION IN AUSTRALIA

The paper presents selected findings from a study aimed at:promoting a general awareness of the economic realities of petroleum exploration in Australia;providing economic guidelines for strategic planning in the Australian energy sector;assessing the impact of current Australian taxation and royalty policies. The database for this appraisal includes $14.8 billion (Note 1) of petroleum exploration expenditures made in Australia to 1987, and 311 possible economic petroleum fields discovered as a result of those expenditures. The study methodology assesses this historical record in the context of present-day economic and technological conditions. Results initially are presented for an anticipated set of base case conditions, representing the average performance of all companies which have undertaken petroleum exploration in Australia. The economic potential of searching for onshore and offshore fields is then contrasted. Time trend findings for both onshore and offshore exploration indicate a substantial deterioration in economic performance from the pre–1968 era, through 1969–77, to the most recent 1978–87 study interval. The main cause is found to be a strong and persistent decline in the average size of economic fields discovered. The combined impact of Commonwealth income tax, federal excise, resource rent tax, and State and Commonwealth royalties, on the incentive to invest in petroleum exploration and field development is shown to be decidedly negative. When attention is focused on the most recently examined interval, 1978—87, the current tax and royalty systems contribute to rendering uneconomic the Australia-wide exploration performance. Finally, several suggestions are provided with a view to restoring the wealth creating potential of petroleum exploration in Australia.