Table of Contents
1. Background and Process for Making Submissions.................................... 2
2. Policy and Framework Overview ............................................................... 4
Policy Context ....................................................................................................... 4
Resource Management Framework....................................................................... 6
Other Issues .......................................................................................................... 9
3. Exploration............................................................................................... 10
Policy Objectives ................................................................................................. 10
Key Elements of the Exploration Regime............................................................. 10
Precompetitive Geoscience and Data Management ........................................ 10
Acreage Release ............................................................................................. 11
Exploration Bidding and Permitting .................................................................. 12
Trends and Challenges ....................................................................................... 13
Emerging Issues.................................................................................................. 15
Precompetitive Data Acquisition and Acreage Release Strategies .................. 15
Building Data to Inform Decision-Making ......................................................... 16
Efficacy of the Exploration Permitting Regime ................................................. 17
4. Development ........................................................................................... 20
Policy Objectives ................................................................................................. 20
Key Elements of the Development Regime ......................................................... 20
Retention Leases............................................................................................. 20
Production Licences ........................................................................................ 21
Trends and Challenges ....................................................................................... 21
Large-scale Projects ........................................................................................ 22
Maturing Basins ............................................................................................... 23
Diminishing Resource ‘Pipeline’ ....................................................................... 23
Emerging Issues.................................................................................................. 25
Overall Effectiveness of the Retention Lease Framework in Promoting the
Timely Commercialisation of Resources .......................................................... 26
Opportunities to Enhance Commercial Incentives for Efficient Infrastructure
Development ................................................................................................... 27
Ability of the Development Frameworks to Manage More Complex Interactions
and Project Operating Environments ............................................................... 28
Annex A: Terms of Reference ........................................................................ 31
Cover image: Courtesy of Woodside Energy Ltd. Northern Endeavour FPSO Northern Endeavour
floating production, storage and offloading vessel, Laminaria-Corallina oil project, Northern Australia.
CONSULTATION PAPER: OFFSHORE PETROLEUM RESOURCE MANAGEMENT REVIEW
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1. Background and Process for Making
Submissions
During 2014-15, the Department of Industry is undertaking a high-level
strategic review of the framework governing oil and gas resource
management in Commonwealth waters to ensure that the framework remains
well placed into the future to support timely and efficient commercial
investment, exploration and development.
The Offshore Petroleum Resource Management Review (the Review) is being
undertaken on the basis that the current regime has served Australia well. Its
purpose is to test whether it can function better in the face of rapidly changing
technological and commercial conditions.
The Review will identify key issues affecting the operation of the offshore
resource management regime across the exploration and production lifecycle.
It will also identify strategic actions that could be implemented to help improve
certainty and flexibility, reduce regulatory compliance costs, and attract
efficient, timely investment and development. Further information about the
Review is provided in the Terms of Reference (provided at Annex 1).
The Review will be informed by an open consultation process to provide
opportunity for effective stakeholder engagement. This Consultation Paper
represents the beginning of this process. It seeks stakeholder views on the
key issues and initial suggestions on strategic actions that could be
considered to help enhance current arrangements. Comments received will
be considered in developing an Interim Report which will outline possible
policy responses. The Interim Report is scheduled for release for consultation
in March 2015. The Final Report will be delivered to the Commonwealth
Minister for Industry by 30 June 2015. Any future reforms contemplated by the
Government will take into account the criticality of maintaining existing rights
and obligations for market participants.
Stakeholders are encouraged to contribute to this process by making written
submissions, which are due by Friday 6 February 2015. Submissions can be
made:
Online:
http://www.industry.gov.au/resource/UpstreamPetroleum/Pages/Offshor
e-Petroleum-Resources-Management-Review.aspx
By email:
OPRMReview@industry.gov.au
CONSULTATION PAPER: OFFSHORE PETROLEUM RESOURCE MANAGEMENT REVIEW
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By mail:
Offshore Petroleum Resource Management Review
Resources Division
Department of Industry
GPO Box 9839
CANBERRA ACT 2600
Publication of submissions:
Submissions will ordinarily be available for public review at
http://www.industry.gov.au/resource/UpstreamPetroleum/Pages/OffshorePetroleum-Resources-Management-Review.aspx, unless you request
otherwise.
Please indicate clearly on the front of your submission if you wish it to be
treated as confidential, either in full or part.
The Australian Government reserves the right to refuse to publish
submissions, or parts of submissions, which contain offensive language,
potentially defamatory material or copyright infringing material.
A request may be made under the Freedom of Information Act 1982 (Cth) for
a submission marked confidential to be made available. Such requests will be
determined in accordance with provisions under that Act.
Contact information, other than your name and organisation (if applicable) will
not be published. Your name and organisation (if applicable) or jurisdiction will
be included on the Review webpage to identify your submission.
CONSULTATION PAPER: OFFSHORE PETROLEUM RESOURCE MANAGEMENT REVIEW
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2. Policy and Framework Overview
Australia’s upstream petroleum sector has experienced substantial investment
and growth in productive capacity in recent years, especially in gas with
nearly $200 billion currently being invested in liquefied natural gas (LNG)
projects nationally. This investment has in large part been underpinned by an
effective and stable offshore petroleum framework.
Policy Context
Continued growth of Australia’s offshore petroleum industry can never be
guaranteed particularly as global competition for investment intensifies.
Australia’s pipeline of large uncommitted petroleum reserves is at relatively
low levels. There are few undeveloped large offshore oil reserves and in
offshore gas most of the remaining commercially viable reserves have been
linked to major development proposals. More reserves will need to be found
to support continued industry growth and gas supplies to our export and
domestic markets.
Timely and effective exploration supported by advanced precompetitive
information will be needed to help address this challenge. Exploration in
Australia is undergoing substantial change as greenfield activity expands into
more challenging frontier and remote areas. It is also moving from the shallow
to mid-depth water shelf into deep and ultra-deep water, which presents new
challenges in terms of the cost, complexity and timeframes for exploration and
subsequent development activities. The increased use of 3D seismic surveys,
including multi-client seismic surveys, has increased the time taken to collect
and process data, which is also contributing to delays and causing some
operators to encounter difficulties in meeting annual work program
commitments.
This raises the question of whether the supporting administrative
arrangements facilitating offshore exploration activities can be enhanced to
reflect the changing operating environment.
Translating discoveries into economic activity and growth requires timely and
efficient commercialisation and production. Technological advances including
new production technologies, like floating LNG facilities, which can change
the economics of developing smaller fields and open access to resources
previously beyond our reach.
However, with production facilities and infrastructure now costing many
billions of dollars, projects are typically more complex and harder to secure. In
a world of growing investment competition it is important that long lived
“foundation” assets can ensure a competitive return by securing long-term
supply through a portfolio of fields. Yet this can create tensions with the goal
CONSULTATION PAPER: OFFSHORE PETROLEUM RESOURCE MANAGEMENT REVIEW
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of timely resource development where alternative commercialisation options
for individual fields might be feasible.
Optimising long-term commercial resource recovery becomes even more
important in these circumstances. As the understanding of reservoir dynamics
improves, the optimisation of resource management in maturing fields and
basins is gaining more focus, particularly how to minimise the inadvertent
stranding or sterilisation of smaller resources.
Minimising development risks and costs will be crucial for bringing forward
efficient and timely offshore petroleum investment. Optimal and cost-effective
development of offshore resources may require greater cooperation and
coordination between industry participants in some cases, especially in
relation to the development and use of related infrastructure, to reduce costs
and improve competitiveness.
These developments have the potential to test the effectiveness and
resilience of the resource management framework into the future. As noted
above, the framework has served Australia well to date and it is not the
intention to revisit the fundamental principles that define the regime. Two
principles which will remain critical to the regime are that resources are best
exploited (and risks managed) through commercial development, and that key
to this is the application of structured property rights which provide due
recognition for the substantial investments and risks taken by businesses.
This paper seeks to open a conversation on the challenges facing the industry
at this time and potential opportunities to improve the regime’s efficacy in
meeting both longer term public and commercial interests.
Key Questions
1. What are the main factors affecting timely, innovative and efficient offshore
petroleum exploration and development?
 economic

operational

commercial


technological
geological

regulatory

nature and volume of available reserves
2. What implications could they have for the operation and regulation of the
offshore petroleum resource management framework?
CONSULTATION PAPER: OFFSHORE PETROLEUM RESOURCE MANAGEMENT REVIEW
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Resource Management Framework
The offshore petroleum resource management framework seeks to promote
the timely discovery and development of petroleum resources for the
economic benefit of the Australian community while also ensuring that
activities are undertaken safely and in an environmentally responsible way
and in accordance with good oil field practice principles. Figure 1 presents a
high-level diagrammatic overview of the exploration and development
framework.
The framework includes a range of policy and regulatory sub-elements across
the exploration-discovery-development lifecycle. It is principally (but not
exclusively) defined through the Offshore Petroleum and Greenhouse Gas
Storage Act 2006 (the Act) and in the Offshore Petroleum and Greenhouse
Gas Storage (Resource Management and Administration) Regulations 2011
(the Resource Management Regulations).
The Commonwealth jointly administers the regime with State and Northern
Territory Governments through a Joint Authority (consisting of relevant
responsible Ministers) for the offshore area of each State and the Northern
Territory. It is responsible for the majority of decision making under the Act
including the granting of petroleum titles, the imposition of title conditions and
the cancelation of titles, as well as core decisions about resource
management and resource security.
Joint Authorities receive advice in relation to exercising their titles decisionmaking powers from the National Offshore Petroleum Titles Administrator
(NOPTA), which is responsible for assessing applications in relation to
offshore petroleum titles and providing related reports and recommendations.
The policy goal of Australia’s resource management framework is not clearly
defined in current legislation or regulations but is generally understood to be
to optimise long-term resource discovery and recovery, recognising the
practical constraints imposed by economic, technological, operational and
geological factors. This is given effect in s.569 of the Act and in Regulation
1.04(1) of the Resource Management Regulations which states that
“operations in an offshore area are [to be]:
a) carried out in accordance with good oilfield practice; and
b) compatible with the optimum long-term recovery of petroleum.”
CONSULTATION PAPER: OFFSHORE PETROLEUM RESOURCE MANAGEMENT REVIEW
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Figure 1: An Overview of the Offshore Petroleum Exploration and Development Framework
Area Selection
Areas nominated for release by industry, state/NT governments and Geoscience Australia.
Nominated areas are evaluated and selected for inclusion in a release
Acreage Release
Annual Acreage Release areas announced by the Federal Minister for Industry
(areas clearly identified as available for either work program bidding or for cash bidding)
Call for Work Program Bids
The Joint Authority invites explorers to bid for areas in the
work program bidding rounds
Bids are assessed by the Joint Authority
The Joint Authority agrees on the successful applicants.
NOPTA, on behalf of the Joint Authority, offers permits to
successful applicants who have 30 days to accept or reject the
offer
Call for Cash Bid Applications
The Joint Authority invites explorers to (i) prequalify (based on technical
and financial competence); then (ii) bid for areas in the cash bidding
round
Cash Bid Auction
Applicants that satisfy the prequalification process are invited to place
a cash bid for the area or areas. The applicant that places the highest
cash bid for the area will be offered the permit. Successful applicants
have 14 days to accept or reject the offer.
Exploration Permit Granted
NOPTA grants permit on behalf of the Joint Authority
Authorities and Consents
NOPTA may grant:
 Special Prospecting Authority over an area
which is not covered by and exploration
permit, retention lease or production
licence. Max period 180 days.
6 Year Exploration Permit in force
Work program permit:
1. 3 year guaranteed primary work program
2. 3 year secondary work program (guaranteed upon entry into each year)
Cash bid permit:
3. 6 year permit (no work program requirements)
Exploration Permit Renewed
If permit is renewable - titleholder
can apply to the Joint Authority for a
renewal of the exploration permit
 Renewal for 5 years
 Halving rules may apply
 Potential limits on the number of
renewals depending on grant
date and/or permit size and type
(cash-bid or work-bid)
 If applicable, maximum 1 renewal
(cash bid)
 Access Authority to an existing petroleum
titleholder for activities other than drilling a
well outside their existing title.
Discovery Made
The exploration program is successful
and a discovery is made. Titleholder
can apply to the Joint Authority for the
declaration of a location over the
discovery
 Petroleum Scientific Investigation Consent
to organisations undertaking scientific
research, including exploration activities
but does not cover exploration wells.
Discontinued
Permit does not continue due to:
Location Declared
Joint Authority declares location over field.
Within requisite timeframe, titleholder can
apply to Joint Authority for a retention lease or
production licence
Not yet Commercial
Retention lease can be granted over
the block(s) in the location if the
discovery is not currently
commercially viable, but is likely to
become so within 15 years
Retention Lease in Force
1. Permit surrendered (conditional to
work commitments)
2. Permit cancelled (titleholder
should consider good standing
requirements)
3. Permit expires - not renewed
Commercially viable
Production licence can be granted
over the block(s) covering a
commercial discovery; a field
development plan is also required
Production Licence in Force
Retention Lease gazetted by
NOPTA and in force.
Production Licence gazetted by
NOPTA and in force
3. For 5 years with work program
4. Can reapply for further Retention
Leases but have to prove not
commercially viable, but likely to
be within 15 years
1. For life of field while producing
2. May be terminated if petroleum
recovery operations are not
carried out for more than 5 years
CONSULTATION PAPER: OFFSHORE PETROLEUM RESOURCE MANAGEMENT REVIEW
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The framework seeks to facilitate timely and efficient exploration and
development through a coherent and integrated approach. It seeks to provide
the industry with sufficient certainty and flexibility to minimise regulatory risk
and compliance costs.
Importantly the framework functions on the premise that industry operating in
response to commercial incentives will generally deliver timely, efficient
outcomes which are consistent with the public interest. This can on occasion
create tensions between what might be the commercially optimal solution for
a particular operator and what might be achievable “in a perfect world”.
Accordingly, the regime aims to maintain a realistic balance between the
operator’s commercial incentives and ensuring the optimal stewardship of
resources that belong to the Australian people.
While these tensions exist it is unclear whether this creates ambiguity which in
turn may discourage investment and industry participation. Alternatively, an
overly prescriptive formulation of the policy goals and objectives could
inadvertently reduce administrative flexibility and increase compliance costs.
An appropriate balance needs to be maintained to provide flexibility while
minimising regulatory uncertainty.
Nonetheless, scope may exist to enhance the current resource management
framework. Some possibilities which are canvassed in this paper might
include:
 Introducing greater differentiation of titles with terms and conditions that
more effectively reflect the uncertainties and longer timeframes
associated with certain offshore activities like ‘frontier’ or remote
exploration, or the commercialisation of long lead-time, large-scale LNG
projects;
 Updating administrative practices and guidelines to reflect changing
operational realities, to provide greater inherent flexibility and
predictability to accommodate less certain and more risky activities; and
 Removing any undue impediments, if any, to the Joint Authority
exercising appropriate flexibility to deliver more timely, balanced and
effective decisions consistent with the resource management objectives
of the Act.
In considering possible reforms it is important to recognise that the
sub-elements for the framework provide an integrated ‘cradle to grave’ set of
incentives and obligations for industry participants. Thus, changes in one area
may have important positive or negative effects on the incentives for activity
or investment in other areas.
CONSULTATION PAPER: OFFSHORE PETROLEUM RESOURCE MANAGEMENT REVIEW
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Other Issues
There are a range of factors that have an indirect bearing on resource
management outcomes including health, safety and environmental regulation,
taxation, labour relations, social license to operate and carbon capture and
storage. Although beyond the scope of this review, the Department would be
interested in views on how these issues may affect the operation and
performance of the resource management framework, especially where they
can have a significant distortionary impact on timely and efficient investment
in exploration and development.
Key Questions
3. To what extent is the framework operating in an efficient and integrated
manner? If not, what are the main areas of friction and how could they be
addressed?
 clarification of policy objectives and key terminology
 nature and scope of legal and regulatory provisions
 application of the framework
4. To what extent does the framework provide sufficient stability and continuity
of property rights to support efficient and timely investment from exploration
through to commercialisation and production?
5. To what extent does the framework strike the right balance between flexibility
and certainty for investment?
6. How could the administration of the framework be improved?
 nature, scope and flexibility of regulatory and administrative practices
 nature, scope and flexibility of Joint Authority decision-making
7. How effectively is the framework operating in response to matters that
indirectly affect its performance? Are there other issues which might be
examined to improve the regime affecting offshore petroleum activity and
investment?
CONSULTATION PAPER: OFFSHORE PETROLEUM RESOURCE MANAGEMENT REVIEW
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3. Exploration
A vibrant and diverse exploration sector is essential for maintaining a strong
and prosperous petroleum industry in Australia over the long term. Offshore
petroleum exploration is a high-risk, high-cost activity and takes place within a
highly competitive international market. At the same time, new technologies
and practices are opening up new areas for exploration across the globe.
For this reason it is critical that Australia’s exploration regime is robust,
conducive to current and emergent practices, and well positioned to
encourage and support future exploration efforts.
Policy Objectives
The exploration regime seeks to facilitate timely and efficient offshore
exploration by:
 significantly advancing the assessment and understanding of the
hydrocarbon potential of Australia’s offshore sedimentary basins;
 reducing commercial risk and encouraging investment through the
provision of precompetitive geoscientific data; and
 providing a sound regulatory framework for exploration in
Commonwealth waters.
Key Elements of the Exploration Regime
The Australian Government aims to establish a sound macroeconomic
environment and regulatory framework for petroleum-related activities. In
addition, it seeks to reduce commercial risk for offshore petroleum exploration
through the collection and dissemination of precompetitive geoscientific data
to the benefit of explorers and the Australian community.
For the purposes of this paper, Australia’s ‘exploration regime’ includes
precompetitive geoscience activities, acreage release, and exploration
permitting as well as data management associated with these elements.
Precompetitive Geoscience and Data Management
The Australian Government plays an active role in improving the
understanding of the nation’s offshore resources base. This work is primarily
carried out by Geoscience Australia (GA) and it involves the collection,
assessment and provision of geoscientific data and information about offshore
sedimentary basins which aims to complement industry efforts (Figure 2
refers).
CONSULTATION PAPER: OFFSHORE PETROLEUM RESOURCE MANAGEMENT REVIEW
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Figure 2: Relationship between exploration and precompetitive
information
Source: Geoscience Australia (2014), modified from BP (2006)
In recent years, GA’s petroleum work program has been focused on frontier
areas, in particular on those basins that are considered to be prospective but
lack sufficient fundamental data to readily identify petroleum systems.
Precompetitive data acquisition programs and geoscientific studies in these
areas have been a priority for GA’s forward work program.
In addition to acquiring new seismic or marine surveys, GA also stores and
manages the data acquired and submitted by industry as part of the
requirements under the Act.
An important part of GA’s work is adding value to submitted data once it
becomes open file. This data is used in basin analytical studies, which GA
releases in dedicated data packages.
This type of value-added data informs industry exploration efforts as well as
the Government’s planning, acreage release and management of offshore
areas.
Acreage Release
The Australian Government annually releases acreage for offshore petroleum
exploration. Released areas are selected based on industry and, every so
often, GA nominations. Shortlisting of areas is based on a range of criteria
including:
 previous interest in, and exploration undertaken in the nominated
area(s);
CONSULTATION PAPER: OFFSHORE PETROLEUM RESOURCE MANAGEMENT REVIEW
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




any potential adverse impact on current offshore exploration acreage
release bidding rounds;
relevant international maritime boundaries;
new geoscientific or market developments, such as domestic demand
changes or an opportunity for early commercialisation of fields, that
might generate interest among potential bidders;
ongoing precompetitive studies by Geoscience Australia; and
implications for management of Commonwealth marine reserves.
Interest in the acreage release areas has fluctuated in recent years. The
varying degree of interest may be due to a range of factors including: broader
economic conditions; access to capital for exploration (which is typically
discretionary spend); market opportunities; risk-reward appetite; the relative
cost of exploration in Australia; perceived prospectivity of release areas; and
regulatory risk.
Exploration Bidding and Permitting
Explorers bid on acreage release areas for the exclusive right to apply to
undertake exploration activities in that area.
Exploration permits are awarded on a competitive basis through ‘work
program’ and ‘cash bid’ processes. Successful work program bidders are
awarded title for six years initially, with potential for two five-year renewals.
They are required to undertake each component of the initial three-year
guaranteed work program within the permit area in the prescribed year as
presented in the original work program. Successful cash bidders are also
awarded title for six years initially with the potential for one five-year
extension. Cash bidders are not subject to work program conditions.
In addition to these titles, ‘special prospecting authorities’ and ‘access
authorities’ allow explorers (such as seismic acquisition companies) to acquire
multi-client seismic surveys that can assist explorers in their search for
petroleum.
Currently, there are 188 offshore areas under petroleum exploration permits,
with a further 30 areas offered for exploration in 2014.
CONSULTATION PAPER: OFFSHORE PETROLEUM RESOURCE MANAGEMENT REVIEW
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Trends and Challenges
Petroleum exploration is a dynamic business which responds quickly to
market conditions. It is high-risk, high-cost and takes place within a very
competitive international market. Figure 3 shows that recent offshore
exploration expenditure remained at historically high levels of between $2.5
billion and $3.2 billion per annum between 2008 and 2013. At the same time,
Figure 3 indicates that the number of new exploration wells drilled has
experienced a steady and marked decline over the same period, with the
number of new wells drilled in 2013 falling to less than a quarter of the levels
recorded in 2009. This trend appears to be the result of the interplay between
a number of factors, which include prospectivity, perceptions of prospectivity,
well costs, rig availability and sub-optimal licencing conditions.
Figure 3: Trends in Exploration Expenditure and Activity - 2008-2013
60
3000
50
$m
2500
40
2000
30
1500
20
1000
10
500
0
Number of wells drilled
3500
0
2008
2009
Number of wells drilled
2010
2011
2012
2013
Expenditure (Seasonally Adjusted)
Source: Petroleum Exploration Society of Australia annual exploration review (APPEA Journal) and
Australian Bureau of Statistics, Mineral and Petroleum Exploration, Australia, Table 6a. Petroleum
Exploration - Expenditure, Cat.# 8412.0. as modified by NOPTA and the Department of Industry.
More challenging business conditions reflecting increasing activity in deep
and ultra-deep water and in remote locations with limited infrastructure are
adding time, risk and cost to exploration activities, and particularly to the cost
of drilling exploration wells. High mobilization and demobilization costs,
especially in more remote areas, are combining with tight markets for offshore
drilling rigs, often narrowing seasonal windows for undertaking exploration
activity and relatively high labour costs to further increase the cost and time
needed to conduct exploration activities.
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They also reflect the innovative ways in which industry is responding to
manage higher costs and risks. Explorers are increasingly deploying a range
of sophisticated technologies and practices to more effectively identify and
analyse prospective plays. This is reflected in the increasing deployment of
3D seismic surveys over the last decade, which has greatly improved the
industry’s ability to cost-effectively identify and assess the commercial
potential of offshore hydrocarbon pools. Figure 4 shows trends in offshore 3D
seismic activity between 2000 and 2013.
Figure 4: Growth in Offshore 3D Seismic Survey Activity - 2000-2013
60000
50000
Sq km
40000
30000
20000
10000
0
Source: Australian Petroleum Production & Exploration Association, Quarterly Seismic Statistics
(various quarters, various years)
Access to more detailed and accurate 3D seismic data is facilitating more
sophisticated analysis and the development of more effective, ‘smarter’
exploration programs. This may be being translated into fewer, better targeted
and more successful exploration wells and activities.
This has also increased the time required to collect and analyse data, further
extending the time taken to develop and execute exploration activities. This is
resulting in delays to the implementation of exploration work programs in
some cases and raises questions about the current administrative timeframes
given the changing operating conditions, particularly in more remote or
challenging areas.
Whist the greater understanding provided by new 3D seismic data reduces
exploration uncertainty, this reduction has not necessarily resulted in a
substantially greater success rates for exploration wells. More importantly, the
actual volumes of hydrocarbons that have been discovered have been
modest, which is reflected in the relatively barren (“unallocated”) resource
inventory within the exploration permits and retention leases. To some extent,
this is the result of a focus on exploring for smaller, more subtle
accumulations within existing provinces.
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Risks, costs and time taken to undertake exploration programs can all be
expected to increase as exploration moves into more remote regions and into
more operationally, technologically and geologically challenging
environments. Maintaining an internationally competitive exploration regime
that can successfully adapt to these trends and challenges will be crucial for
attracting the timely, efficient and innovative exploration investment needed to
help maintain a healthy rate of commercial discoveries into the future.
Emerging Issues
In light of these challenges, it is worth considering where there might be
opportunities to improve the regime. Issues to be considered include:
 the effectiveness of the precompetitive data acquisition and acreage
release;
 availability and use of data to inform resource management and
industry decision-making; and
 the permitting regime and whether it is conducive to current and future
offshore exploration efforts in Australia.
This is by no means and exhaustive list. Stakeholder feedback on other
issues and how they relate to the regime would be welcomed.
Precompetitive Data Acquisition and Acreage Release Strategies
The value of precompetitive activities is widely recognised, given that much of
Australia’s offshore areas are underexplored and frontier areas may offer
significant potential for large-scale discoveries.
However, resources for precompetitive data acquisition and interpretation are
limited, and efforts need to be prioritised to promote timely and efficient
exploration over the longer term. In this context, it is worth considering what
kind of precompetitive information may most improve the chance of success
in exploration, as well as the regions and types of areas (i.e. frontier) where
precompetitive effort is best focused.
Given the limits on public resources there may be merit in considering
opportunities to leverage efforts between Government and industry in areas
where there is limited or no information. This could, for example, be through
partnerships to acquire dedicated precompetitive data sets that allow the
assessment of hydrocarbon prospectivity. However, such an approach would
require careful consideration of access and use of the data (possibly a short
term look-ahead of data release) to ensure that public information needs are
met while also providing a commercial incentive for private sector investment.
In terms of the acreage release, blocks should include those considered most
prospective and of immediate interest to explorers to sensibly maximise the
commercial attractiveness of acreage offered for bidding.
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However, this approach may not provide sufficient medium-term clarity when
developing multi-year exploration strategies and schedules. Consideration
could be given to whether the Australian Government’s acreage release (and
to an extent precompetitive) activity should be “guided” by a clearer medium
term exploration strategy that sets out broad goals and directions.
It may also be timely to consider whether the acreage release as a whole is
consistent with industry’s longer-term exploration strategies, including:
 appropriate size of release areas, and the benefits of larger or smaller
areas;
 diversity of areas to offer opportunities for various explorers (larger and
smaller companies, as well as seismic companies); and
 timing of the release, and whether one or two rounds per year best
matches industry’s requirements.
Key Questions
8. What opportunities are there to improve or leverage precompetitive
geoscience activities to support more effective exploration in the longer term?
9. To what extent could there be benefit in providing opportunities for carefully
defined precompetitive partnership programs?
10. How effectively is the precompetitive program targeted and linked with
acreage release? How could these links be improved?
11. To what extent is the acreage release appropriately sized, diverse, and
timed? What is working with the acreage release program and what could be
improved?
12. Would there be benefit in developing an exploration strategy to help guide
longer term activities?
Building Data to Inform Decision-Making
The current data management regime is well-regarded, delivering a world
class geological information base. However, the data collection and
management is being tested through changing practices and technologies.
Significant amounts of data are generated and it is timely to ask whether this
information is being used in the most effective way, including in reducing the
overall costs of maintenance and access to data.
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Advanced exploration technologies such as 3D seismic imaging are essential
to greater drilling success, something critical given the decreasing numbers of
wells being drilled. This is undoubtedly beneficial in terms of reducing
uncertainty and informing decision-making. Given the greater use and benefit
of these 3D seismic studies, it may be worth considering whether the regime –
specifically, exploration work programs - appropriately recognises the value
and timeframes associated with these seismic studies.
There is also a question whether the confidentiality period for data will remain
appropriate looking ahead. For example, non-exclusive seismic surveys have
a 15 year confidentiality period, while exclusive surveys acquired as part of a
work program have a confidentiality period of 3 years.
While access to this data may be purchased from service providers, there is a
question whether the 15 year confidentiality period remains appropriate, and
whether this may present an unintended barrier for business and exploration.
Key Questions
13. To what extent are the data management arrangements working effectively?
14. To what extent are the arrangements (i.e. work program timing) relevant
given current technology?
15. To what extent are the current data confidentiality structures appropriate?
16. What implications does increasing use of multi-client surveys have for
exploration and the operation of the exploration regime?
Efficacy of the Exploration Permitting Regime
Delivering on committed work programs has been challenged by ongoing
difficulty of operating in a tight rig market with growing pressure on availability
and scheduling. These factors - in addition to seasonal, environmental and
climatic factors that are outside the control of operators - and can have a
significant impact on exploration in terms of cost and time, and with
implications for permit management.
Frontier areas are becoming increasingly accessible with the benefit of new
technologies and practices. However, given the lack of geological data they
involve different risks, costs and time for development. In addition, frontier
exploration often occurs in deeper water, across large and remote areas, with
little or no existing infrastructure.
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These factors raise the question of whether the administration of work
program activities is sufficiently flexible to allow explorers to manage
operational pressures. There have been a relatively high number of work
program variations, suspensions, and extensions granted in recent years.
While there are legitimate reasons for these variations, the scale of variations
suggests that explorers are finding it difficult to meet their “annual” work
program commitments. This may be due in part to explorers ‘over-bidding’
with unrealistic work programs to secure exploration permits. It also suggests
that greater flexibility may be required so that the expectations around
mandatory work programs can more efficiently adjust to changing commercial
realities.
In this regard, it may be worth considering what would be most appropriate for
different exploration activities in terms of the permit conditions, including:
 permit term – (whether a six year term is appropriate);
 guaranteed work periods and upfront commitment to activities;
 the valuation attached to seismic activities; and
 the number, value and timing of wells.
The expectations around competitive work program bids for large, remote,
deep-water frontier areas could be very different to those for areas in shallow
water, close to known accumulations and infrastructure. In practice, these
considerations are taken into account in bid assessment; however there may
be merit in developing a clearer understanding of the activities that can be
reasonably expected in these different areas.
There may be some frontier areas where explorers wish to screen for its
hydrocarbon potential by carrying out studies before committing to acquiring
seismic data or drilling wells. Such an activity could take two or more years
(rather than a full six year program), but currently the instruments are of
limited duration to allow this to occur.
The Department of Industry is currently consulting stakeholders on options to
bring additional flexibility in petroleum exploration permits through a review of
the suite of exploration guidelines. This work is being undertaken in parallel to
this review, and is expected to be finalised in May 2015. Further information
can be obtained by contacting petroleum.exploration@industry.gov.au.
A further option for work program exploration permits relates to adjoining
exploration permits held by the one title-holder, whereby the actual
exploration activities cover a play concept and are managed as one project,
but separated by the borders of the title. There may be some merit and
efficiencies in converting the individual permits into one larger permit to cover
the play concept , which could result in a more efficient exploration outcome,
and reduce cost and administrative burden.
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However this raises some issues given that the permit was awarded within a
competitive process based on an individual work program, and that the work
program commitments should be honoured. It also raises challenges where a
play concept spans permits held by different joint ventures.
Key Questions
17. To what extent do exploration bidding and work programs – and how they are
administered - reflect the reality of offshore exploration, and offer explorers
sufficient flexibility to manage operational pressures?
18. What opportunities are there to encourage more effective frontier exploration,
including shorter periods for screening activity?
19. What elements of the regime could be tweaked to encourage frontier
exploration?


permit length
renewability

work program commitments
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4. Development
Offshore petroleum resource management regulations provide a framework
for managing the orderly progression of petroleum discoveries through
commercialisation to production.
Policy Objectives
The framework’s principal objective in relation to development is to provide a
coherent, transparent and predictable regime that delivers sufficient certainty
for investment and reinforces commercial incentives for timely and efficient
development.
Key Elements of the Development Regime
The policy objective at the development stage is largely secured through the
application of two complementary regulatory elements of the production
framework; retention leases and production licenses. A declaration of a
location over a petroleum accumulation is required before a retention lease or
production licence is granted.
Locations
While not a title under the Act, locations underpin the offshore petroleum
development regime by providing the mechanism to transition areas within an
exploration permit to a production licence or a retention lease following the
discovery of petroleum. Areas declared as locations remain part of the
exploration permit until a production licence or retention lease is granted.
Locations are another component of the regime that seeks to support the
earliest commercialisation of petroleum resources while also providing
security of tenure to holders of exploration permits. Locations remain valid for
two years however this may be extended for a further two years at the
discretion of the Titles Administrator.
Retention Leases
Retention leases are addressed under Part 2.3 of the Act. Their purpose is to
provide security of title for petroleum resources that are not currently
commercially viable but which have genuine development potential. A
retention lease may only be granted where the applicant demonstrates that
the recovery of petroleum:
 is not commercially viable1 at the time of application; and
 is likely to become commercially viable within 15 years of submitting a
retention lease application.
1
Commercially viable as defined in the operating guidelines for retention leases means the
petroleum can be developed given existing knowledge of the field, having regard to prevailing
market conditions and using proven, readily available technology.
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Retention leases have a term of 5 years and can be renewed subject to
meeting the commerciality test and any related lease conditions. Lease
renewals may be refused where the Joint Authority considers the resource to
be commercially viable or is unlikely to become commercially viable within 15
years. Where the resource is considered commercially viable, the applicant
has 12 months to apply for a production licence. In addition, third parties are
able to make submissions to NOPTA on retention lease renewals.
There are currently 58 active retention leases. 48 of these leases (83%) are in
their first term (24 leases) or have been renewed once (24 leases), while ten
have been renewed on two or more occasions (17%). Thirteen retention lease
renewal applications are currently under assessment.
Production Licences
Under Part 2.4 for the Act, a production licence authorises the licensee to
carry out petroleum recovery operations in a licence area. Production licences
provide the legal basis for projects entering construction and production and
have specific resource management objectives and requirements, which are
largely achieved through approved rates of production and field development
plans (FDP’s). FDP’s are technical documents that detail a proponent’s
strategy for developing and exploiting a discovery over its economic life.
In addition to the general condition that the licensee continue to explore for
petroleum and recover petroleum where commercially viable to do so, a
production licence can include separate conditions relating to resource
management.
Effective resource management is also supported by unit development
provisions. Section 191 of the Act provides for unitisation through a ‘unit
development agreement’ between adjacent production licence holders where
a petroleum pool straddles separate titles. The purpose of the unitisation
obligation is to ensure that both title holders are able to exercise their rights
without detriment to the other or damage to petroleum resource recovery.
However, unitisation has been very minimal to date and its impact on timely
and integrated field development needs to be further considered.
Currently there are 116 production licences. The majority are located in the
Gippsland or Carnarvon Basins.
Trends and Challenges
Technological advances, changing business practices, the changing nature of
the resources available for development and the evolving nature of
international and domestic energy markets are reshaping the offshore
petroleum industry, particularly the gas sector. These developments raise a
number of commercialisation and production related challenges which may
test the longer term robustness of the development framework.
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Large-scale Projects
Offshore petroleum projects, especially LNG projects, are by nature large,
expensive and technically and financially complex. Table 1 provides a
snapshot of recent large-scale LNG developments in the Carnarvon Basin. It
shows that these projects are typically characterised by long lead times, high
risk, high capital costs and long production lives, all of which can have
substantial implications for the timing of resource development.
Within the Carnarvon Basin there will soon be four LNG projects operating,
which will have between one and five LNG ‘trains’ producing between 4.3 and
16.3 million tonnes of LNG per annum. The larger of these projects typically
have 40 to 50 year plus lifespans. These projects require access to
substantial quantities of gas. For instance, the NWS Project, at a 16.3 million
tonne per annum rate of production, would consume up to 35 trillion cubic feet
(TCF) of gas over 45 years. Moreover, there are plans for substantial
expansion beyond the current capacity; Pluto to two trains, Wheatstone to a
maximum of five trains and Gorgon to perhaps four trains.
Table 1: Snapshot of Major LNG Projects in the Carnarvon Basin
Project
Capital
Expenditure
North West Shelf
 ~$27 Billion
Gorgon
 ~$55 Billion
Pluto
 ~$14.9 Billion
Wheatstone
 ~$29 Billion
Ichthys
 ~$34 Billion
Prelude
 ~$12 Billion
Production
Capacity1
 5 trains
 ~16.3 mtpa
 3 trains
 ~15.6 mtpa
 1 train
 ~4.3 mtpa
 2-5 trains
 ~8.9 mtpa
 2 trains
 ~8.4 mtpa
 1 train (floating)
 ~3.5 mtpa
Notes:
1 = Currently or proposed.
2 = Period from discovery to first gas.
Source:
NOPTA 2014
Period to
Commercialise2
Production
Period
 ~18 years
 ~45 years from
1989
 ~36 years
 ~50+ years from
2015-16
 ~7 years
 ~25+ years
 ~12 years
 ~25-40 years
from 2016
 ~16 years
 ~40+ years from
2017
 ~10 years
 25 years from
2017
These projects need secure long term access to resources to ensure a return
on the large capital investments in plant and infrastructure. Initial foundation
fields typically underpin 20 to 30 years of production, with the remaining
resources required to underwrite these projects provided by smaller satellite
fields which will be brought on-stream to maintain full capacity as the
foundation fields are depleted. Given a 40 to 50 year project life, it is possible
given the current interpretation and application of the retention lease
provisions that satellite fields associated with large scale LNG projects could
remain within a retention lease for an extended period. This currently creates
tensions with other interests which may see alternative development options
for individual fields. At present these parties could provide a submission to
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NOPTA identifying alternative commercialization options or they can make a
commercial bid for the resource.
At the same time, the business environment is increasingly challenging with
growing international competition for investment from projects in North
America, the Middle East, Russia, and East Africa. Any additional uncertainty
that serves to increase project risk and cost could result in investment moving
to competing international projects.
Ensuring security of access to resources over the long life of these projects is
crucial for attracting the substantial investment needed for their
commercialisation and eventual development. However, this raises the issue
of how to balance security and certainty against the objective of bringing
forward efficient and timely development of resources.
Maturing Basins
Significant exploration and development in the Carnarvon and Gippsland
basins has resulted in a more complex development landscape with multiple
fields and ownerships structures. This is raising new challenges for achieving
optimal long-term commercial resource recovery.
For example, the evolution of the Carnarvon Basin shows that up until 1990
the basin would have appeared to be dominated by a series of large, isolated
hydrocarbon pools. The potential for regional interactions between fields,
which could have affected optimal, long-term commercial recovery from those
pools, is unlikely to have been considered. However, the acceleration of
discoveries from the mid-90’s onwards has revealed that the basin is actually
made up of a dense mosaic of pools, many of which overlie, overlap or are
continuous with each other.
As a result, there may be a greater potential for developments to have
unintended effects, which may have implications for optimal long-term
commercial resource recovery in the future. For instance, the current
approach to the management of resources on a project-by-project basis may
not always effectively account for the potential impacts on, and from, other
projects in surrounding licences, which may result in sub-optimal long-term
commercial resource recovery from petroleum systems spanning multiple
projects. There are also risks that differing commercial priorities could result in
the stranding of some less attractive (but still commercial) resources.
Diminishing Resource ‘Pipeline’
Fewer and smaller pools of standalone commercially viable resources will
influence the way the industry develops them. This may have implications for
the nature and timing of resource commercialisation and production into the
future.
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The significant number of substantial new LNG projects in the Carnarvon
Basin has been made possible by discoveries that were made decades ago in
some cases. Although there have been a large number of small discoveries
over the last eight years, no giant fields have been discovered over the
period. Other sedimentary basins in Commonwealth waters have recorded
similar results with the exception of the Browse Basin.
This trend is reflected in a diminishing ‘pipeline’ of commercially viable gas
resources for further greenfield projects beyond the projects currently being
developed. For example, Figure 5 shows that in the Carnarvon Basin there is
only one gas accumulation in either the retention lease or exploration permit
system which could act as a foundation pool for a greenfield LNG project (>~5
TCF). Indeed, most may be too small to support a floating LNG development
(>~3 TCF).
Several factors affect the time taken to commercialise a resource including:
market demand; resource size; state of the existing infrastructure; water
depth; geographic remoteness; and available ‘ullage’. As a result, pools can
remain within retention leases through several renewal cycles, until the
combination of economic and market conditions, knowledge and technology
allow their commercial development.
Figure 5: Estimated Available Recoverable Gas Resources in
Exploration Permits and Retention Leases in the Carnarvon Basin
45
40
D
i
s
c
o
v
e
r
i
e
s
35
30
25
20
15
10
5
0
>5 TCF
1-5 TCF
0.5-1 TCF
Estimated TCF (P50)
<0.5 TCF
Note: Gas resources yet to be commercially linked with a proposed development project.
Source: NOPTA 2014
CONSULTATION PAPER: OFFSHORE PETROLEUM RESOURCE MANAGEMENT REVIEW
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Innovative application of more mobile, flexible and cost-effective production
technologies, such as floating LNG, offer the potential to bring forward
commercialisation and production of some smaller and more remote fields.
Similarly, developers are deploying lower cost, mobile drilling and production
technologies based on Floating Production Storage and Offloading (FPSO)
vessels to produce portfolios of adjacent small fields which otherwise would
not have been cost-effective to develop.
Commercialisation and production of smaller pools might also be brought
forward by optimising the use of, or access to, existing infrastructure to help
reduce development costs. However, there may be some practical limitations
to multiple use of existing infrastructure, especially where the chemical
composition of petroleum differs significantly across fields. How the market
will respond to these opportunities and challenges remains to be seen.
Pressure for faster commercialisation of petroleum resources is also
increasing from third parties and some State Governments, particularly some
larger domestic gas consumers. Concerns have been raised about the
application of the retention lease provisions, which some large domestic gas
users have argued can provide companies with a potential mechanism to
schedule production for future export at the expense of domestic users - a
practice commonly referred to as warehousing. However, recent reviews of
the retention lease arrangements have concluded that the rationale for
retention leases – to create a continuing property right that provides certainty
and incentive for efficient exploration and development - remains valid.
Emerging Issues
From a framework perspective many of the main challenges relate to the
tensions inherent in a system that is structured on field by field assessment
and the private versus public considerations in optimising long-term resource
recovery.
This is not to suggest that the key principle of commercial development is
under consideration – this approach has been the foundation of Australia’s
success in attracting investment and will remain so into the future. Keeping an
appropriate balance between timely development and providing certainty for
long-term investment will be crucial for ongoing success.
Key aspects of the regime identified for deeper consideration include:
 the overall effectiveness of the retention lease framework in promoting
the timely commercialisation of resources;
 opportunities to enhance the incentives for efficient infrastructure
development; and
 the ability of development frameworks to manage more complex
interactions and integrated project structures.
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Overall Effectiveness of the Retention Lease Framework in
Promoting the Timely Commercialisation of Resources
The retention lease framework is applied in the same way across all titles
despite the fact that nearly all petroleum discoveries and resources are
unique in their combination of geology, location and commercial prospects.
It is clear that there are fields, such as those located in remote or deep water
areas, which are unlikely to advance significantly towards commercialisation
within the five year duration of an initial retention lease. This may be
especially so for capital intensive large-scale projects in remote locations
which are dependent on securing multiple fields in advance to underpin
project economics and long-term supply contracts. The Joint Authority
currently takes these matters into consideration when evaluating retention
lease applications and renewals. However, rolling renewals may create the
perception of development being unduly delayed which may lead to claims of
warehousing. It could also be argued that extending the duration of retention
leases may weaken the incentive to develop commercially viable fields in a
timely and efficient manner.
In these circumstances, the question arises as to whether a ‘one-size-fits-all’
five year renewal timeframe serves a practical purpose or whether it adds
unnecessarily to compliance burdens and project risks. Should consideration
be given to extending the period of a retention lease, or to setting
commerciality periods that more closely reflect project development
timeframes? What impact might this have on commercial incentives for timely
development?
It is also evident in some circumstances that the commercialisation of
clustered smaller fields is likely to be tied to access to foundation
infrastructure and processing facilities. This could suggest that treating such
resources as part of an overall project - which could comprise fields in several
separate leases - rather than assessing them on a lease by lease basis may
be more realistic and practical.
Flexible and pragmatic interpretation and application of the framework has
helped maintain an appropriate balance to date. However, it is worth
questioning whether reliance on administrative flexibility alone is appropriate
and whether it will continue to provide sufficient resource certainty for
investors undertaking long lead-time, large-scale petroleum projects. Scope
may exist to augment the current administrative flexibility with differentiated
titles that provide greater legal certainty of tenure for long-term, multi-field
development projects. Options may include differentiated titles such as a
special form of retention lease, or possibly by linking retention leases directly
to production licenses in cases where fields form an integral part of an
ongoing production project. A key goal in this and any other reform is ensuring
that the perception of “sovereign risk” is maintained at the lowest practical
levels.
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Alternatively, there may be opportunities to clarify and improve flexibility
through improved guidelines and practices. For example, establishment of a
process that provides greater transparency around retention lease
decision-making may help to address concerns raised by third-parties about
potential warehousing. Scope may exist to improve transparency, for
example, through more clearly defined and articulated avenues for
stakeholder input to title decisions and through the publication of the reasons
for decisions.
Comment is sought on whether a more differentiated approach could provide
greater and more practical flexibility. If such flexibility was to be considered
how could it also ensure that there were sufficient competitive pressures for
timely development? Could this include greater transparency in decision
making associated with a retention lease?
Key Questions
20. To what extent is the retention lease framework providing the right balance
between certainty and flexibility for investment and timely, efficient
commercialisation?
21. To what extent is the current use of administrative discretion providing
sufficient flexibility and security of tenure to attract investment and support
timely, efficient commercialisation?
22. How could the retention lease framework be improved to facilitate greater
certainty for investment and more timely, efficient and cost-effective
commercialisation?
a. differentiated retention leases or production licenses to improve
security of tenure for long-term, multi-field developments
b. more flexible durations for retention leases
c. removal of the rolling 15 year development window
d. increased administrative flexibility through guidelines and practices
e. improved administrative transparency through clearer mechanisms for
stakeholder input and publication of reasons for decisions
Opportunities to Enhance Commercial Incentives for Efficient
Infrastructure Development
Poorly coordinated infrastructure development and limited access could affect
optimal resource recovery in maturing basins or across adjoining project
areas. It could also make small field development more challenging with a
consequent risk of delayed or deferred development, and possibly result in
resource stranding or sterilisation in extreme cases. In addition, it could result
in inefficient use of existing infrastructure as basins mature and foundation
fields are depleted.
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History has shown that attempts by Government to dictate development
outcomes in a commercial space are rarely, if ever, successful. However, it
remains to be seen whether efficient and timely commercial solutions will
emerge to bring forward integrated projects involving third-parties.
Comment is sought on whether there are opportunities within the current
development frameworks to improve commercially-driven incentives for
coordinated and efficient investment in, and access to, offshore infrastructure.
Key Questions
23. How could incentives for efficient infrastructure investment and operation be
improved within the existing development framework?
a. coordinated regional development of infrastructure
b. more efficient use of existing infrastructure
c. multi-use access to infrastructure
Ability of the Development Frameworks to Manage More Complex
Interactions and Project Operating Environments
Increasingly crowded operating environments in mature provinces are raising
new challenges for resource management. While not commonplace there
have been instances in recent times where exploration and development
activity has resulted in multiple discoveries within a title (e.g. an oil and gas
deposit) or in a better understanding of complex geological interactions
between fields. These may potentially create circumstances where the
commercial interest of an operator may focus only on one resource leaving
another with commercial potential stranded or sterilised, or result in individual
production strategies across a field that spans more than one project title
area.
Unit development provisions seek to address some of these circumstances
but are currently limited to directing more effective resource recovery in cases
of adjoining production titles that share a common resource. Scope may exist
to increase the coverage of unit development agreements between holders of
retention leases and exploration licenses, as a way to encourage more
efficient and timely coordinated development in cases where a field spans
multiple titles.
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Another possibility may be to issue production titles with boundaries that are
more closely correlated with the geological dimensions of discoveries, to help
strengthen commercial incentives for optimal long-term resource recovery
while reducing the need for subsequent unit agreements. However, closer
alignment of title boundaries based on incomplete knowledge at the time of
issuing a production license may risk creating title boundaries that impinge on
unlicensed acreage, increase the risk and frequency of stymied unitisation,
and result in acreage relinquishment patterns that make recycling areas
problematic.
There may also be scope to consider the wider regional implications of
development through the field development planning process. Alternatively,
there may be opportunity to improve access to wider regional information,
possibly through the publication of such information as part of a non-binding
basin development strategy, which could be published by the Joint Authority.
Comment is sought on how the Joint Authority might best look to promote
optimal long term resource recovery within a framework of commercially
driven development in such circumstances.
Could refined titling that more closely aligns title boundaries with the geology
of discoveries result in more efficient long-term commercial production
outcomes? How could this work in practice when titles are held by different
joint venture or joint venture structures? Similarly, could more effective use be
made of unitisation provisions to facilitate efficiently coordinated development
in some cases?
Is there scope to take a more regional system-wide approach to field
development planning, or to improve access to system-wide information to
inform more effective commercial decision-making affecting regional
production in these circumstances?
Key Questions
24. How effectively is the framework operating in response to more complex
geological and operating environments?
a. promoting timely development of small fields
b. minimising sub-optimal commercial resource recovery in the long term
from fields and formations spanning multiple producers
c. minimising the incidence of stranding and sterilisation
25. How could the framework be improved to more effectively encourage optimal
long-term commercial resource recovery in these circumstances, including
minimising the risks of stranding or sterilisation?
d. extend the scope and coverage of unitisation provisions to support
more effective coordinated field development where required.
e. adopt production title boundaries that more closely reflect the
CONSULTATION PAPER: OFFSHORE PETROLEUM RESOURCE MANAGEMENT REVIEW
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underlying geology.
f. consider the regional system-wide implications of production
proposals during field development plan assessment.
g. publish regional system-wide information to inform collective
commercial production decisions.
h. scope to support more efficiently coordinated basin development.
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Annex A: Terms of Reference
OFFSHORE PETROLEUM RESOURCE MANAGEMENT
REVIEW
TERMS OF REFERENCE
1. Context
Australia’s offshore resource management legal and operational framework
aims to encourage timely and efficient and sustainable exploration and
development of oil and gas resources in Commonwealth waters. The current
regime has served Australia well to date, attracting substantial investment and
supporting the development of an efficient, dynamic and internationally
competitive offshore oil and gas industry.
However, challenges from growing international competition and a changing
offshore operating environment with risks and costs rising as fields mature
and new frontier areas are explored and developed make it prudent to look at
whether ongoing and timely development of Australia’s oil and gas resources
are being appropriately supported into the future.
New technologies and industry practices have and will continue to improve
the offshore petroleum industry’s ability to access and exploit resources
previously considered too difficult or uneconomic. These changes across the
sector are testing the robustness of the policy, legal and regulatory framework
governing Australia’s offshore resource management going forward. A
framework that is flexible enough to keep pace with this evolving operating
environment could help attract investment in the exploration and development
of Australia’s offshore oil and gas resources.
During 2014-15, the Australian Government will undertake a high-level
strategic review of the framework governing oil and gas resource
management in Commonwealth waters. The Offshore Petroleum Resource
Management Review will ensure that the framework is fine tuned to support
timely and efficient commercial investment, exploration and development.
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2. Objectives & Scope
Consistent with the Government’s regulatory reform agenda, the Review will
identify key strategic actions that could be implemented to improve the policy
and regulatory framework governing offshore resource management in
Commonwealth waters. Any proposed actions will seek to enhance the
framework’s clarity and flexibility and reduce regulatory risks and costs, with
the aim of supporting optimal commercial investment in the development of
Australia’s offshore oil and gas resources. They will not be applied
retrospectively to change existing property rights or contractual arrangements.
The Review will examine in an integrated manner the key sub-elements of the
offshore resource management framework as they apply over the entire
exploration and production lifecycle. This could range from how
precompetitive data and information supports exploration activities in rank
frontiers or underexplored regions to the assessment whether the current
regime governing exploration, retention and production activities are providing
the most effective commercial incentives and flexibility needed to retain and
attract new investment in Australia’s offshore petroleum sector. The Review
will also take into consideration changing technologies and industry practices
in Australia and world-wide.
The Review will identify key emerging economic, commercial, geological and
technical issues that are currently or have the future potential to affect
offshore resource management across the exploration and production
lifecycle. It will also review the policy and regulatory framework governing
resource management to identify strategic opportunities to:
 clarify and reinforce the policy objectives and principles underpinning
the Government’s approach to resource management in
Commonwealth waters;
 identify legal and regulatory gaps; and clarify, simplify and rationalise
the legal and regulatory framework to help improve regulatory certainty
and reduce related costs; and
 improve the flexibility of the resource management framework so it can
more effectively accommodate complex geological conditions,
technological advances, evolving commercial practice and emerging
operating challenges.
The Review will reflect strategic directions established in the Energy White
Paper and related ongoing policy development being undertaken by the
Australian Government. It will also provide an opportunity for external
stakeholders to identify actions to remove undue impediments to business
activity and to improve the attractiveness of the framework.
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The Review will deliberately maintain a high level and strategic focus and as
such it will not undertake a detailed assessment of all existing legal,
regulatory and administrative arrangements governing resource management
in Commonwealth waters. However, detailed examination of some
arrangements may be required in the context of developing proposed key
strategic actions.
There are a range of issues that indirectly affect resource management
outcomes which are outside the scope of the Review. These include: health,
safety and environmental regulation; taxation; labour relations and skills
formation; developments in capital and commodity markets; and social licence
to operate. Similarly, the resource management dimensions of rules
pertaining to offshore carbon sequestration are considered outside the scope
of this Review.
3. Deliverables
The Review will propose a clear set of strategic actions that could be readily
implemented to improve the policy and regulatory framework governing
offshore petroleum resource management in Commonwealth waters.
A consultation paper will be released in November 2014 to seek stakeholder
views on key issues and strategic actions to enhance current arrangements.
An interim report will be released for consultation in March 2015. The final
report will be delivered to the Commonwealth Minister for Industry by
30 June 2015.
4. Project Management
The Review will be undertaken by the Commonwealth Department of Industry
in close consultation with key stakeholders. Representatives from industry,
jurisdictions and various Commonwealth bodies will be invited to work
alongside Departmental staff undertaking the Review. The Review will be
supported by a Commonwealth-led working group including key industry,
jurisdictional and institutional partners.
The Review will be facilitated though an open consultative process which will
provide opportunity for effective stakeholder engagement and for all
stakeholders to make substantive written submissions in response to the
consultation paper and interim report.
CONSULTATION PAPER: OFFSHORE PETROLEUM RESOURCE MANAGEMENT REVIEW
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