Oceania > Australia > Australia Oil

Australia: Australia Oil

2011/06/06

According to the Oil and Gas Journal (OGJ), Australia had 1.5 billion barrels of proven oil reserves as of January 1, 2005. The majority of these reserves are located offshore in the Bass Strait off southern Australia and the Carnarvon Basin off western Australia. Oil production in Australia has increased gradually since 1980, peaking in 2000 at 805,000 thousand barrels per day (bbl/d). In 2003, production fell dramatically to 630,522 bbl/d. For 2005, oil production is estimated at 553,331 bbl/d. The reasons for decreased production are varied. First, oil producing basins such as Cooper-Eromanga and Gippsland have experienced natural declines. Second, although, oil basins such as the Carnarvon and Bonaparte have yielded increasing volumes of oil in recent years, the increase has been offset by the steady rise in domestic consumption. Third, oil production declines have been attributed to the Australian tax system, which makes investment unattractive for domestic producers.

Australian oil production and consumption. (Source: EIA)In 2005, petroleum consumption was estimate at 918,000 bbl/d, resulting in net imports of around 364,669 bbl/d. By comparison, net oil imports in 2000 averaged only 54,000 bbl/d. The Australian government expects petroleum import dependency to increase to 50 % by 2010. The majority of Australia’s imported crude comes from the UAE, Malaysia, Vietnam, and Australia’s key oil producers, Santos and Woodside, have shown signs of increasing domestic exploration and bringing new projects onstream by 2007 in hopes of increasing domestic oil supplies and reducing imports.

Sector Organization

The Australian government does not own any of the country’s oil companies. Applications for onshore exploration and production projects are managed by national governments, while the Commonwealth government has jurisdiction over Australia’s offshore projects. Australia’s oil sector is regulated by the Ministry of Industry, Tourism and Resources (MITR) and the Ministerial Council of Energy (MCE). In 1967, the Petroleum (Submerged Lands) Act was passed, giving jurisdiction rights to the federal and national governments over petroleum exploration and development. Currently, the government is in the process of rewriting the Act for simplification purposes and to create new incentives to increase oil production.

Major oil production companies in Australia include Woodside Petroleum Limited, ExxonMobil/Esso Australia, Santos Incorporated and Apache Corporation. The companies averaged net oil production for 2004 of 343,100 bbl/d, 174,100 bbl/d, 31,500 bbl/d and 26,600 bbl/d, respectively.

Exploration and Production

The Australian government is continuing to issue new exploration permits in hopes of increasing domestic petroleum supply. In 2005, the government opened bidding for exploration permits in 29 new offshore areas in 13 regions. Larger blocks included areas in the Outer Exmouth Plateau, Bremer Sub-basin and Otway basin, while medium to smaller block areas were in the Northern Browse Basin and Carnarvon Basin. The first round of bidding closed in October 2005 and the second round will close in April 2006.

There is hope that new projects being brought on line will stabilize Australia’s oil production for a few years. New developments include the Mutineer-Exeter project led by Santos. The companies involved in the Mutineer-Exeter project are expecting production levels between 70,000 bbl/d and 90,000 bbl/d. In addition, ConocoPhillips plans to develop fields in the Timor Sea, Zoca and Coleraine, with combined reserves of 150 million barrels. There are as well a number of fields off Australia’s northwest coast that have recently come on line. These include Eni’s Woollybutt, Apache’s “String of Pearls” and Woodside’s Legendre and Lambert fields.

Exploration off Southern Australia is led by Santos, which has identified additional recoverable natural gas reserves than petroleum. Because its adverse weather conditions and deeper waters make potential ventures costly, much of the area around Southern Australia has not from now on been explored. Furthermore, only of the 36 wells drilled in Australia’s deep waters since 1992 have yielded oil. Australia’s Woodside Energy abandoned as dry its Gnarlyknots well in the Great Australian Bight in May 2003. But Santos remains hopeful about locating oil in the Otway and Sorrell Basins.

The majority of past petroleum exploration in Australia has been carried out by large domestic oil firms, including BHP Billiton, Woodside Petroleum, and Santos. In contrast, current exploration ventures have seen better participation of smaller Australian companies, inclunding increases in foreign interest. In September 2004, for example, Oilex announced a discovery in Queensland’s Surat Basin expected to have reserves of 12 million barrels.

Australia has shale oil reserves in Queensland estimated as high as 30 billion barrels. Until recently, environmentalists had prevented the primary developer of Queensland’s shale oil, Southern Pacific Petroleum/Central Pacific Minerals (SPP/CPM), from utilizing the resource. As a result, each major Australian refining firm refused to purchase Queensland’s shale oil in 2001, forcing the industry to look to the government for support. In May 2002, the government extended existing excise rebates, originally designed only for the domestic sale of shale oil products, to international markets for 12 months months later, SPP/CPM secured a long-term contract for the domestic sale of naptha, derived from shale oil, to Mobil Oil Australia.

In 2004, the Australian government introduced a tax incentive designed to promote offshore petroleum exploration. Because of high cost and risk, around 50 % of Australia’s offshore basins have not been explored. The tax incentive, which applies to frontier blocks opened between 2004 and 2008, will help to lower some of the exploration cost incurred by the oil companies. In addition, the Australian government made a-year, $30 million commitment to fund AGSO-Geoscience Australia, a national agency that provides petroleum and natural gas companies with seismic and geological data.

Pipelines

Australia has a well-developed oil pipeline network. The Australian Pipeline Trust, with 4,350 miles of pipeline, is the major operator. Epic Energy is the second major, with 2,500 miles of pipeline major domestic pipelines that are used for carrying oil and oil products include the Jackson to Brisbane line that spans 500 miles, and the Mereenie to Alice Springs line that spans 167 miles. Both of these are operated by Santos. In addition, the 432-mile Moomba to Stony Point pipeline, with a capacity of 394.2 Mmcf/d, is operated by Epic Energy and is used for carrying a mixture of natural gas liquids and crude oil. Finally, the Longford to Long Island Point pipeline is 115 miles long and is operated by Esso Australia Ltd.

Refining

Australia has eight refineries each owned by companies, with total crude oil distillation capacity of 754,975 bbl/d of the refineries are located on the country’s eastern coast, three on the southern coast and in Western Australia. Australia’s refineries are relatively small, the three biggest being: BP Australia’s Kwinana refinery (132,050 bbl/d crude oil capacity); ExxonMobil’s Altona refinery (130,000 bbl/d crude oil capacity); and Shell’s Geelong refinery (110,000 bbl/d crude oil capacity). Australia’s fourth refining company is Caltex.

Amount eight refineries have experienced declining gross margins for several years, mainly due to competition from foreign refineries benefiting from economies of scale. An oversupply of refining capacity in Asia, coupled with the relatively high cost of transporting crude oil to Australia, has been another factor hurting the country’s refiners. Beginning in 2006, Australian refineries will be held to higher fuel quality standards. In order to comply, most of the refineries will need facility upgrades. Currently, Australia’s refineries are equipped to mainly process light, sweet crude oils, even though heavier, sour crude oils may be cheaper. In April 2003, ExxonMobil announced plans to close its 78,000-bbl/d Adelaide refinery, citing poor refining margins. Analysts have estimate additional closures in Australia’s refining sector in the next.

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