Australian Petroleum Production and Exploration Association chief executive Belinda Robinson told delegates that Australia was confronting an enormous crude oil current account deficit.
Last year’s deficit of A$1.5 billion would balloon to a projected A$3.7 billion deficit this year.
There was an enormous emerging gap between domestic production and consumption and a $A30 billion deficit in petroleum liquids alone was possible by about 2020, based on a world oil price of $US40 per barrel.
One of the challenges facing the Australian industry was to continue supplying the domestic market with competitively priced gas, which was currently only about one quarter the price of exported LNG.
Essentially much of Australia remained under-explored. While the number of offshore wells drilled each year had remained roughly the same since the mid-1980s, the number of onshore wells was falling.
Last year saw about A$260 million spent onshore and the projected figure for this year was about A$280 million. Offshore expenditure had increased from A$660 million last year to a projected A$840 million this year. Offshore exploration costs were increasing by about 30%, but offshore rig rates had jumped from about US$65,000 to US$220,000 per day in little more than a year.
Robinson said it was disappointing Australia was not really seeing increased exploration activity, particularly in frontier regions, despite high oil prices.
“It’s these frontier areas we really need to focus on in the short-to-medium term to improve our deficits – the challenge is frontier exploration,” she said.
Australia’s good fiscal and regulatory regimes needed to be overlaid with the higher risk profile.
“We need better rewards for frontier regimes, a fundamental shift; our enemy is complacency . . . we need the federal government and industry to work together to address these challenges.”
Australia needed to sell 13 times as much LNG as it did oil, on a barrel of oil equivalent (boe) basis, to create the same export value. It was possible the country could export 60 million tonnes per annum by 2015-2020.
And Australia was only producing about 65% of its light sweet crude needs, whereas that used to be 80%.
McDouall Stuart executive director Chris Stone said New Zealand also faced some really tough energy challenges.
The gas supply crisis he described at the last biennial conference had not gone away.
Concentrating on electricity generation, with former large gas user Methanex virtually out of the picture now, continued economic growth of only 1.8% per annum would necessitate over 200MW of new generation each year and the country was “a long way short of that,” he said.
The New York Mercantile Futures Exchange had bids for oil at or over US$60 per barrel 12 years out, so the markets were hedging against continued high oil prices.
Given a middle-of-the-road scenario – with oil priced at only US$50, coal at US$55 per tonne and New Zealand gas at NZ$6 per gigajoule – that would cause the energy input to the New Zealand economy to more than double from the 1996 figure of NZ$2.5-3.0 billion to about NZ$7 billion in 2012.
The percentage energy component would rise from 3% to 7%.
“That’s quite a material challenge for the New Zealand economy to survive,” Stone said.
