Petroleum industry activities in Australia, beyond coastal waters, are governed by Commonwealth legislation - the Offshore Petroleum and Greenhouse Gas Storage Act 2006. Please refer to the previous section regarding the future of this legislation.
This Act enables areas to be released for the purpose of petroleum exploration. Government policy is to release exploration areas on an annual basis with two closing bid rounds. Areas released are notified in the relevant Australian or State/Northern Territory (NT) Government Gazette and a comprehensive information package is made available on CD-ROM and on the Departmental website: www.ret.gov.au/petexp. Areas are made available under the work program bidding system.
The legislation currently makes provision for five types of title to be granted to companies:
- exploration permits - provide exclusive rights to undertake seismic surveys and drilling in a defined area;
- retention leases - granted to holder of exploration permit, where a discovery is not currently commercial but is expected to become so within 15 years;
- production licences - granted to holder of exploration permit or retention lease, for the recovery of petroleum following a commercial discovery;
- infrastructure licences - granted to enable the construction of offshore facilities for the storage and processing of petroleum; and for the construction of facilities for the recovery of petroleum in areas outside a production licence; and
- pipeline licences - granted for the transport of petroleum by pipeline between facilities or to processing plants.
A list of fees relating to the above titles is at Appendix F.
In areas not covered by titles, companies may be granted a special prospecting authority to undertake seismic or other geophysical or geochemical survey work. This is a non-exclusive right to examine an area prior to the invitation for applications for an exploration permit. A special prospecting authority over an area does not provide any rights in relation to the award of an exploration permit. All operations require specific approval before the activity commences. Applications should be made to the relevant State/NT office (see Appendix B).
Exploration Permits
Prospective offshore acreage released each year is made available for bidding under a work program bidding system.
Under the work program bidding system, an applicant is required to propose an exploration program over six years. The first three years of the program is known as the "minimum guaranteed work program", and all program components in the first three years must be completed to avoid cancellation of the permit. The applicant also identifies a "secondary" work program to cover the final three years of the permit. This secondary work is guaranteed on a yearly basis which provides a greater degree of flexibility for the permittee.
All applications are assessed against the selection criteria by a panel of officials representing the relevant Joint Authority. The basic objective in awarding any exploration permit is to select the work program bid most likely to significantly advance the exploration status of the area. For further information on the selection criteria and assessment process please refer to 2009 Guidance Notes for Applicants publication which is also available online at: www.ret.gov.au/petexp
Exploration permits are issued for an initial term of six years, and in most circumstances may be renewed for a further two terms each of five years (some existing permits can be renewed more than twice). At each renewal 50% of the permit area must be relinquished. Special provisions apply to permits with six or fewer graticular blocks and permits of only one block cannot be renewed.
While there is also provision for a cash bidding system within the OPGGSA, this has not been used since 1992 and is contrary to current Australian Government policy.
Production Licences, Infrastructure Licences, Pipeline Licences and Retention Leases
Upon making a petroleum discovery, a permittee must notify government giving details of the discovery. The permittee must identify the block or blocks covered by the area of a discovery.
A location is declared over the discovery and the permittee may undertake further exploration and/or appraisal activities within the location blocks to determine more accurately the nature of the discovery. The permittee may also apply to vary the size of the location, or even to have the location revoked, if the discovery is thought to be ultimately non-commercial.
If the discovery is considered by the permittee to be commercial, the permittee may apply for a production licence. The permittee has two years after the declaration of a location (or a possible further two years in special circumstances) in which to apply for a production licence, and provide details of development proposals for the area. Production licences are issued for the duration of production plus a period of five years.
If a permittee makes a non-commercial discovery that is likely to become commercially viable within the next 15 years, an application may be made for a retention lease rather than a production licence. As with a production licence, the permittee has two years (or a possible further two years in special circumstances) after declaration of the location in which to apply for a retention lease, and provide an assessment of the commercial prospects of development.
Retention leases are issued for five years, with renewal periods of five years. At the time of application for a grant and at each renewal of a retention lease, the lessee must demonstrate that the discovery is not currently commercially viable, but is likely to become commercially viable within the next 15 years.
Where a location is not revoked and if the permittee does not apply for a production licence or a retention lease within the specified time, the exploration permit in respect of the blocks covered by the location will be terminated.
Where production facilities require a pipeline to transport petroleum to shore or other facilities, a pipeline licence will be granted indefinitely. But it may be terminated if no construction occurs or it is not used for a continuous period of at least five years.
An infrastructure licence enables a company to carry out certain petroleum activities, such as conversion of gas to LNG or methanol, or to store and process petroleum. It also allows a company to utilise infrastructure which lies outside the licence area.
Titleholders' Obligations
The legislation provides that all titleholders must carry out operations according to good oilfield practice, including carrying out operations in a manner which is safe and prevents the escape of petroleum into the environment. In order to retain title, conditions of work must be met and annual rental fees paid. Additional information on matters relating to the Australian Government's offshore petroleum legislation is contained in:
- the OPGGSA, as amended from time to time, the associated Explanatory Memoranda and Second Reading Speeches;
- the Petroleum (Submerged Lands) Regulations (notably on Environment, Fees, Diving, Safety, Pipelines, Data Management and Well Operations) which remain valid under the OPGGSA;
- a Schedule of Directions issued under the Act - "Specific Requirements as to Offshore Petroleum Exploration and Production" which also remain valid under the OPGGSA; and
- administrative guidelines issued to assist with the administration of the legislation.
These documents can be viewed on the website at: www.ret.gov.au/resources/upstream_petroleum
Prospective applicants should also be aware of the Special Notices that are set out in the 2009 Guidance Notes for Applicants.
This document can be viewed on the website at: www.ret.gov.au/petexp
For further information on petroleum exploration and development matters contact petroleum.exploration@ret.gov.au