The Australian Petroleum Production & Exploration Association (APPEA) today warned that unless the tax changes were implemented by the Federal Government, Australians would be hit with a greater reliance on imported supplies for our petrol pumps.

APPEA, which has some 50 member companies that explore for oil and gas, said it had already commenced discussions with the Federal Government to identify ways of enhancing oil and gas investment in Australia.

Meeting in Perth today, the Federal Council of APPEA - responding to the Federal Parliamentary Inquiry into Resource Impediments - unveiled a five-point tax reform proposal, which it said would help alleviate the fuel production crisis (more details attached).

APPEA's Executive Director, Mr Barry Jones, said: "High global oil prices and new gas sales to Asia will not be enough to produce the revival in oil exploration activity that is needed if Australia is to avoid looming supply reliability problems."

"Unfortunately, the seemingly good times Australia is currently experiencing may lull some of the nation's key decision-makers into a false sense of security," he said.

"It's time for these policy makers to roll up the shirt sleeves and get serious about the long term future for our transport fuel production.

"Unless this issue is addressed immediately, Australia's petrol and gas consumers face a supply nightmare with dire consequences for the nation as a whole."

The tax reform options proposed by APPEA are:

1. An increase in the Petroleum Resource Rent Tax (PRRT) uplift rate for general project costs for all future projects (oil and gas) from the long term bond rate (LTBR) plus five percentage points to a minimum of the LTBR plus 10 points.

2. Introduction of a barrel of oil equivalent (boe) exemption for all future field developments in PRRT areas.

3. An updating and extension to the current five year PRRT GDP factor rule.

4. The introduction of an "exploration premium" under the company tax system for government nominated acreage.

5. A modification to the tax provisions to assist in unlocking exploration deductions for companies via a share flow through arrangement for investors.

Mr Jones said it was essential the Federal Government addressed taxation laws that are discouraging investment in oil exploration.

"Australia faces the dual challenge of needing to improve its overall energy supply position in terms of domestic oil and gas production, as well as needing to obtain valuable export income to address the nation's ongoing balance of trade deficit position," he said.

"APPEA has commenced discussions with the Federal Government with a view to identifying changes to the taxation system that will assist in meeting those objectives.

"The industry has put on the table a number of options that it considers will go a long way towards creating a climate that is more conducive to investment in the industry and not undermine the Government's budget strategy."

APPEA believes any changes must include a strong emphasis on the difficulties confronting junior exploration companies in their attempts to obtain capital.

Mr Jones said junior explorers play a crucial role in Australia's overall petroleum exploration effort.

"The innovative techniques and vision that many of these companies use as part of their exploration programs has greatly assisted Australia in the past in discovering oil and gas resources from new areas," he said.

"What is of fundamental importance is that the Government addresses this particular problem in an expeditious manner."