Australian oil plans

Press, 7 February 1986, Page 8

Australian oil plans

By

SUE MITCHELL

AAP correspondent NZPA Sydney

Australia’s oil exploration companies have no immediate plans to cut exploration this year, despite the recent collapse in world oil prices. However, exploration is likely to be reviewed later this month when the Government decides whether to retain its import parity pricing policy which aligns Australian oil prices with world prices, according to the Australian Petroleum Exploration Association (APEA).

The APEA’s executive director, Mr Keith Orchison, said that most oil exploration companies had committed themselves to programmes at least for the first half of the year.

“There is an element of

uncertainty, but my impression is that companies at this stage do not have plans to cut back on exploration,” Mr Orchison said. “But that’s subject to developments in the next couple of weeks,” he said.

“We have recommended to the Government first to retain the import parity pricing policy, and I stress the policy. We have also said to them that Arab light should continue to be the marker.” The policy, which ties the price of Australian oil to the Arab (or Saudi) light price, is due to be adjusted on March 1 and is to be reviewed by the Government about February 24.

The oil producer Santos, Ltd, said yesterday that the Government should make the least possible change to the local crude oil pricing system, and retain Saudi light as the marker crude. This would

avoid overturning the system to accommodate short-term movements yet to be confirmed as trends.

Santos said it was less disruptive to small field pro-ducer-explorers, which had structured Investment and financial plans on the basis of continuation of the present pricing system. It also protected the relevance of the policy for when spot Saudi light reasserted its traditional role as price maker.

“Santos believes that the continued application of the present policies . . . will help ensure that industry obtains benefits from the reduction in crude oil prices without putting at risk a significant part of Australia’s petroleum exploration and development programmes," the company said.

Mr Orchison said media reports of continuing oil price falls exaggerated the situation because they quoted Futures market prices, which were generally lower than physical market prices.

“I don’t believe the Futures market is a valid representation of the state of the market,” he said. "There is strong feeling in the industry in Australia that this present very sharp downturn is something of an aberration and oil will move up again in the not too distant future.”

Mr Orchison said the industry felt a realistic price would be about SUS 23 to SUS 24 a barrel, representing a fall in the price of crude oil in Australia of $7 to $B.

APEA has estimated that for every SUSI drop in the price of oil the Federal Government stands to lose SI6OM. However, it was impossible to estimate by how much exploration funds would be cut if world oil prices remained at their present low levels or fell further. “I have a concern that the combination of price uncertainty and high interest rates in Australia will have a depressing effect on investors, who may be reluctant to provide new funds for the industry at the end of this year or next year,” Mr Orchison said.

He said present exploration in Australia was not enough for Australia to maintain selfsufficiency in the 19905. The fall in Australia’s oil reserves in the next five years would be substantial and the fall in production would be severe as the Bass Strait fields neared the end of their productive life, he said.

Australia was likely to be importing 44.45 per cent of its supplies by 1992, and 75 to 80 per cent by 2000, compared with the 24 per cent imported now.