Australia: Explorers warn of oil import blow-out

"Alarm clock has gone off" By Michael Weir

THE war in Iraq has increased the urgency to introduce tax incentives to boost the level of oil and gas exploration in Australia, according to the industry's peak lobby group.

The Australian Petroleum Production and Exploration Association said on the eve of its annual conference in Melbourne that hundreds of millions of dollars would be required to rebuild Iraq and investment funds would be directed away from Australia unless there was more incentive to invest.

APPEA chief executive Barry Jones said if exploration expenditure in Australia did not double to more than $2 billion a year, the country's level of petroleum self-sufficiency would plunge.

Australia imports about 60 per cent of its petroleum needs each year and the Federal Government has now slashed its forecast of how long current reserves can last to 2008 from 2014.

If Australia's reliance on imported petroleum increases, it would cause a massive blow-out in the country's balance of payments.

"Iraq is going to need to be rebuilt and so is Venezuela after the oil strikes and that is going to take hundreds of millions of dollars," Mr Jones said.

"There is going to be a capital shortage in oil and gas and we need to find $14 billion for exploration just to stay at the same level of self-sufficiency that we are now."

Mr Jones said the Federal Government's energy policy "alarm clock has gone off".

"Sadly after promises, promises and more promises, Australia's frail efforts to develop a meaningful energy policy are in tatters," he said."We are running out of time to install an energy policy that will produce long-term benefits for all Australians."

Mr Jones said it was a laudable objective for governments to say they want affordable, clean and secure energy supplies."What they don't understand is that they won't achieve such objectives by tinkering with the structure of petroleum product taxes, putting ethanol into petrol, focusing primarily on retail and wholesale energy market competitiveness and subsidising industry development for renewables," he said.

If the parameters for exploration were wrong, development would not occur, but equally the parameters for development needed to be right to encourage exploration.

He said taxation policy could not be set in stone if Australia wanted to stay as an internationally attractive destination for capital.

He also said small to medium business, a critical part of the oil and gas industry, was being driven out of business or forced offshore by the higher regulatory approval hurdles and costly, complex and overlapping approvals process.