Australia’s crude oil and gas condensate production peaked in 2000 and has been declining ever since, Australian Petroleum Production and Exploration Association chief executive Belinda Robinson said.

“Australia has a substantial and growing deficit between what we produce and what we consume,” she said.

“This country’s self-sufficiency in petroleum liquids was previously between 80% and 90%, but is now going down by about 10% year-on-year. It is currently about 65% and if this trend continues will be about 30% by 2015.”

This has big implications for the country’s balance of trade. By the time Australia reaches 30% self-sufficiency in crude and condensate, this will produce a trade deficit of about $20 billion, equivalent to the country’s current total trade deficit, according to Robinson.

Eliminating this deficit will require much more exploration, especially in frontier areas that could still offer major discoveries, she said.

WA Department of Industry and Resources petroleum and royalties division director Bill Tinapple agreed there were big opportunities in Australian frontier basins, but lamented that explorers were reluctant to enter these basins, especially frontier basins.

“We believe there is huge potential in the Canning, Officer and Amadeus basins, which are huge and very underexplored,” he said.

“The Canning has an area the size of France with similar geology to other Paleozoic basins in North America where significant fields have been discovered,” Tinapple said.

While similar basins in the US had seen an average of 500 wells drilled per 10,000sq.km, the Canning had had just four wells drilled per 10,000sq.km.

Tinapple acknowledged that potential explorers faced enormous difficulties in the Canning.

“There is very little infrastructure in the basin,” he said. “Explorers there usually have to build roads themselves. The environment is harsh and remote. It is desert but also prone to flooding.”

Tinapple said more had to be done to encourage exploration in such environments.

“Our department applauds the Commonwealth Government’s granting of funds for onshore exploration,” he said. “We hope that much of that goes to petroleum and doesn’t get locked up in hard rocks.”

Tinapple was referring to a Federal Government program announced in June that allocated $58.6 million for geophysical surveys and mapping technologies for onshore basins. The government has also extended the Big New Oil program run by Geoscience Australia, adding a further $76.4 million for precompetitive work on offshore frontier basins.

The Department of Industry, Tourism and Resources’ head of energy and environment division Drew Clarke told the conference that Australia had to offer extra incentives as historically Australia has offered smaller targets than most other prospective countries, so explorers tended to prefer to prefer overseas destinations.

“Government has to give incentives for explorers to invest in Australia rather than overseas, and precompetitive surveys is one way of doing this,” he said.

Belinda Robinson agreed, saying that increasingly even Australian companies were taking more of their exploration budgets offshore, and local exploration had stagnated with the number of wells being drilled in recent years actually falling.

But Tinapple was hopeful that this would turn around, saying that there had been a lot of interest in block releases both in WA and around Australia generally. WA had granted more permits in the last 12 months than it had in the last two to three years and many more blocks, including some in frontier basins were under application, he said.

3D seismic and other predrilling work had increased and an increase in drilling should soon follow, he said.

But petroleum consultant Peter Gaffney of Gaffney, Cline & Associates said governments in Australia and elsewhere could do much more to encourage exploration.

“It is difficult for governments to give up tax received currently, but it less difficult to forgo tax on production that doesn’t yet exist and might never exist without the right incentives,” he said.

“If government really wanted to get a lot more oil and gas, they would say any new discoveries made after a certain date would be tax-free. That would bring in a lot more rigs.”

But new discoveries alone cannot eliminate Australia’s liquids fuels deficit as it is also partly a refining problem.

Even if Australia found enough oil and condensate to meet all its transport needs, it does not have the refining capacity to process all of those petroleum liquids.

Shell Australia chairman Russell Caplan told the conference that Australia now had to import between 20% and 25% of its liquid fuel needs and the country’s seven active refineries were small by international standards.

“I doubt very much that we will see another refinery built in Australia, although more refineries are being built in Asia and the Middle East. Australia could be importing up to a third of its fuel by early next decade,” he said.

However, he acknowledged that some of this growing deficit could be filled by synthetic fuels that can be used in existing engines and distributed via existing infrastructure, such as gas-to-liquids and coal-to-liquids.

Biofuels could also grow significantly, according to Caplan.

“We expect that in the next 20 years, biofuels will grow to about 7% of transport fuel sales and increasing fuel prices will drive the development of different fuels. We will also see the development of cleaner fuels to minimise the impact on health and the environment.”