The Law around Petroleum Exploration and Production in Australia

Introduction

Petroleum geographic expedition and production in Australia is carried out between two participants the authorities ( Commonwealth, States or Territory ) that owns the crude oil resources ; and the oil companies who explores and produces the oil and gas ( crude oil ) . There are two chief grounds why authoritiess need Oil Companies, is risk capital which is really expensive, and their deficiency of expertness to transport out crude oil geographic expedition and production work. [ 1 ] Petroleum is a composite mixture of of course transpirating hydrocarbon compound, which runing from gas to solid. Hydrocarbons are organic chemical compounds where C and H are combined together in many ways. When in its simplest constellation it is methane gas when it becomes heavier it will normally alter from a gas to a fluid so to a solid ( bitumen ) . [ 2 ] This is a instance survey and how the good standing in the command procedure of crude oil licenses was altered in the twelvemonth 2000.

Deriving Exploration Licenses

In September 1996 a mob consisting Shell Development Australia P/L ( Shell ) as operator, Chevron Asiatic Ltd ( Chevron ) and Cultus Timor Sea Ltd ( Cultus ) ( Consortium ) discovered crude oil in the Cornea construction. A construction is where crude oil sedimentations are found in sedimentary stone, this stone is full of holes like a difficult sponge. Petroleum is trapped in these holes under force per unit area and heat for 1000000s of old ages. [ 3 ] To seek for crude oil an geographic expedition license ( EP ) is needed, an EP is where an applicant commands for the right for sole rights to research for crude oil in prescribed countries of land ( Blocks ) , for a six twelvemonth term reclamation for five old ages ( merely renewable twice ) . If crude oil is found a Production Licence ( PL ) or if presently unprofitable a Retention Lease is needed. An EP is issued to set about the most comprehensive appraisal of the area’s crude oil potency, utilizing best pattern direction rules, holding respect to the environment and to safety. [ 4 ] The Consortium had a Block EP WA-241-P the imperativeness had ventured that this EP in Commonwealth Waterss off Western Australia, was potentially the largest crude oil discovery outside the Bass Strait. Offshore crude oil geographic expedition is managed by a joint authorization ( JA ) between the Commonwealth and the State and Territory authoritiess. State and Territory statute law associating to geographic expedition encompasses to the coastal Waterss of three maritime stat mis get downing at the low tide seashore line. The country past this boundary line under Exclusive Economic Zone [ 5 ] allows sole right to economic activity to the extent of 200 maritime stat mis from the shore line and to the Continental shelf’s outer bound is regulated by Commonwealth statute law, which runs the activities and disposal through the JA. All Territories and States have statute law that reflects the Commonwealth statute law. [ 6 ] New Blocks that were immediate to the Consortium WA-241-P were gazetted for application with a shutting day of the month of 31/1/1997. The Government Gazette is the official publication to inform tenders/bidders naming specifications and conditions and the shutting day of the month of each stamp after which commands are assessed and so awarded. [ 7 ] The Consortium made a command three times greater than any other old command. Because they believed in their research that it would be productive. The Consortium was awarded the two EP WA-265-P and WA-266-P ( WP ) Blocks which were the immediate to its WA-241-P. This was under the old statute law ofPetroleum ( Submerged Lands ) Act 1967-1985 ( Cth ) ( PSLA ). The Commonwealth has later repealed that statute law and replaced it with theOffshore Petroleum and Greenhouse Gas Storage Act 2006( Cth ) ( OPGGSA ) which commenced in 2008.

The Compulsory Work Program

Compulsory work plans benefit non merely the appliers as they besides provide the most comprehensive appraisal of Australia’s crude oil potency and increases geological cognition of Australia’s offshore sedimentary basins. [ 8 ] If crude oil is discovered it will besides supply worldwide involvement in developing Australia’s crude oil resources. After the first twelvemonth the Consortium appraisal of WP was it was uncommercial, their analysis was high viscousness, thin rim of oil, with less than ten per centum recoverable oil. High viscousness oil ( bitumen ) has been degraded from rough oil by eroding and bacterium. High viscousness oil is really opposition to flux at reservoir temperatures doing it uncommercial at this clip to mine. [ 9 ] The Consortium conceded their scientific bases for their commands were invalid. After utilizing the best available scientific discipline there is no replacement for existent boring the Wellss. The Consortium applied that the 2nd license twelvemonth to be suspended, and for the term of each license to be extended by a similar period. This would let them to halt work and give them clip to be able to work out a manner of non carry throughing any farther duties they have under their EP. The JA rejected the Consortium applications, their evidences were non considered to be force majeure. The term force majeure concerns the jurisprudence of insurance and is used in contracts to safeguard the participants in the juncture that a subdivision of the contract can’t be executed due to grounds that are beyond the power of the participants, such as physical catastrophes, that couldn’t be avoided through the execution of due attention. [ 10 ] JA bases for joint authorization, [ 11 ] rank for each State and Territory, consist of the responsible Commonwealth Minister and the relevant State or Territory Minister. The JA can depute all or any of their powers and maps to allow State/Territory and Commonwealth section functionaries. Cardinal maps and powers of the JA include: the release of geographic expedition countries for offshore crude oil, rating of trade commands of these countries, refusal or granting and renewing of offshore crude oil rubrics, change of rubric conditions, extension and suspension to title footings and the cancelling of rubrics. [ 12 ] The Consortium drilled a farther five Wellss and applied to give up their licenses, as the Consortium wished to obtain future contracts, and it didn’t wish to consist its good standing agreements ( GSA ) with the Government. The Consortium didn’t garbage to finish the compulsory work plan and endure the cancellation of the EP. A refusal could intend loss of GSA and dearly-won long drawn out legal action and could hold branching for its present/future licenses, non merely with the Australian Government but they could lose face worldwide. This could besides do it really hard with their other land area if they were successful in happening productive Fieldss they may happen really hard to obtain a crude oil production license to reap their discovery.

Good Standing Agreements

Under S104 of the PSLA [ now OPGGSA s 270 ( 6 ) ] if the Consortium didn’t complete the primary work plan for the first three old ages they would hold breached the EP conditions. At that clip it was authorities policy to merely give up the EP and retain good-standing at the beginning of the 4th twelvemonth after carry throughing the conditions once the first three old ages were completed. The Commonwealth maintains a GSA registry, of all offshore crude oil articulation governments and records all evolvement against GSA understandings. Any abortion to follow with the footings of the GSA would do the permittee and company managers, being recorded as ‘not in good standing’ with the JA for five old ages from the when the cancellation of the license was gazetted. [ 13 ] The federal curate responded to the Consortium in a negative mode saying it would non be consistent with keeping the unity of the work plan command system, and the demand of equity to all companies researching offshore. Offshore crude oil rubrics were granted on the system of work-programme command. This strategy allocates geographic expedition land area to appliers who are offering the greatest sum of work to look into the crude oil capableness of a release country. This is capable to holding the fiscal and proficient capableness to follow with their work committednesss. [ 14 ] Keeping the unity of the work plan command system, with equity to all companies researching offshore, is an overruling concern of the Government. [ 15 ] Because of the impact the Consortium application to give up their WP licenses may hold, the JA started proceedings to call off the WP licenses. As the Consortium didn’t complete the primary work plan for the first three old ages, it would be taken they had non complied with EP conditions sing work. [ 16 ] The curate of province for districts, as the designated authorization ( DA ) cancelled the WP permits on 10/12/1999. [ 17 ] The likely impact on the Consortium at that clip would hold meant loss of their GSA ( Government policy at that clip ) , dearly-won long drawn out legal action and have branching of its present/future licenses.

New Agreement on Good Standing Agreements

On 19/10/1999 the federal curate announced the Consortium had reached understanding with the Commonwealth and West Australian authoritiess to keep their GSA. Shell persuaded the authorities that 30 million dollars was their portion of the cost of the staying obligatory Wellss. They offered to pass that sum on geographic expedition in countries non taken up in recent releases. Not all Blocks have companies that wish to research them some have no bidders after stamps near, so Shell will pass the 30 million dollars on some of those Blocks. Chevron offered to pass 17 and a half million dollars boring extra Wellss on its other EP in stead of finishing its portion of its WP outstanding rentals. The Government could see the benefit in coming to these agreements with Shell and Chevron. As the Australian Government is looking to accomplish the most comprehensive appraisal of Australia’s crude oil potency and increasing geological cognition of Australia’s offshore sedimentary basins. [ 18 ] To maximize the fiscal value of Australia’s crude oil resources, supply Australians with a reliable supply of competitively valued energy and at the same clip guaranting a suited return to Australians for the depleting of these non-renewable resources. [ 19 ] Australia has an active policy to pull international investing, and seeks to promote and retain investing from international oil companies. [ 20 ] Both Shell and Chevron has provided considerable hazard capital antecedently and it is in the Australian Government best involvement to go on to hold them as bidders in the hereafter. There isn’t a big sum of companies wishing to put on the line a big sum of hazard capital in Australia as it doesn’t obtain a bidder for some of its blocks. The result of these dialogues by Shell and Chevron became embodied as an amendment to the PSLA in 2000, so was Offshore Petroleum Act 2006 ( Cth ) s 84 ( 2 ) and now OPGGSA s 106 ( 2 ) . Before this amendment to the PSLA in 2000 the JA had no discretion to negociate an understanding so as a defaulter non be placed on the banned list for GSA. Since the amendment the JA can now negociate with license holders to guarantee that they are non placed on the banned list. GSA is the consideration of the appraisal of the appliers past public presentation for an EP. Bing recorded as ‘not in good standing’ would intend the permittee would be banned from keeping an EP for five old ages. A full list of GSA guidelines can be found under Exploration Permit Guideline: License Conditions and Administration ( 2012 ) s 5. [ 21 ]

Ranking of multiple appliers for work-bid crude oil geographic expedition license, is the dialogue held between the permittee and the JA to forestall being recorded as ‘not in good standing’ , all of the dialogue guidelines are laid out in the OPGGSA. [ 22 ]

Decision

The association affecting the Oil Companies and the authoritiess of Australia is one where they both have different grounds for coming together to research for Australia’s crude oil resources. For the Oil Companies it is net income, so for them they want to pass the least sum of their financess for maximal sum of net income for their company and stockholders. This is why authoritiess of Australia have to be really careful when covering with Oil Companies particularly in the countries of safety and the environment. Even when Governments lay down Torahs and ordinances to command safety and the environment Oil Companies take short cuts and don’t follow safety ordinances. Look at the BP Deepwater Horizon accident in the Gulf of Mexico, where people have been killed and injured, and environment ruined. [ 23 ] Where Governments have different precedences, they look to develop Petroleum benefit of current and future Australians. This includes gross, many other related concerns and employment. This survey shows how both Oil Companies and Governments need each other for their ain ends. When jobs occur there is a demand for common sense and both parties need to work together to happen a solution. [ 24 ]

Bibliography

A Articles/Books/Reports

The APPEA Journal, [ 2003 ]

David Maloney, ‘Australia ‘s Offshore Petroleum Work Program Bidding System ‘ [ 2008 ] Journal of Natural Resources 127

Hunter Tina and John Chandler, Petroleum Law in Australia ( LexisNexis Butterworths, 2013 )

B Case Law

C Legislation

Petroleum ( Submerged Lands ) Act 1967-1985 ( Cth )

Offshore Petroleum and Greenhouse Gas Storage Act 2006 ( Cth )

D Treaties

Tocopherol Other

Australian Government Gazettes, AusTender ( 2013 )

hypertext transfer protocol: //australia.gov.au/publications/australian-government-gazettes

Commonwealth Department of Resources, Energy and Tourism, Exploration Permit Guideline: License Conditions and Administration ( 2012 ) & lt ; hypertext transfer protocol: //www.nopta.gov.au/_documents/guidelines/PermitConditionsAdministration.pdf & gt ;

Department of Resources, Energy and Tourism, Australian Petroleum News ( October 2010 ) hypertext transfer protocol: //www.innovation.gov.au/resource/Documents/upstream-petroleum/apn/APN % 20Oct % 202010.pdf

Department of Resources, Energy and Tourism, Competitive Cash Bidding System ( 2013 ) hypertext transfer protocol: //www.google.com.au/url? sa=t & A ; rct=j & A ; q= & A ; esrc=s & A ; source=web & A ; cd=1 & A ; ved=0CEIQFjAA & A ; url=http % 3A % 2F % 2Fwww.innovation.gov.au % 2Fresource % 2FDocuments % 2Fupstream-petroleum % 2FCash-Bidding-Fact-Sheet.doc & A ; ei=t9PdUtjfMsaLkwW8yICIAg & A ; usg=AFQjCNGNRcGMMNLx5NYwdi7Ct_HquJ8tEQ & A ; bvm=bv.59568121, d.dGI

Encyclopedia of Earth, Deepwater Horizon Disaster ( December 2010 )

& lt ; hypertext transfer protocol: //www.eoearth.org/view/article/161185/ & gt ;

Energy Task Force, Securing Australia’s Energy Future ( 2004 )

& lt ; hypertext transfer protocol: //www.efa.com.au/Library/CthEnergyWhitePaper.pdf & gt ;

Farlex, The Free Legal Dictionary ( January 2014 ) & lt ; hypertext transfer protocol: //legal-dictionary.thefreedictionary.com/Force+Majeure & gt ;

Government of Western Australia, Petroleum Exploration Permits ( 3 July 2013 ) & lt ; hypertext transfer protocol: //www.dmp.wa.gov.au/1691.aspx & gt ;

Kansas Geological Survey, Energy Research ( June 2008 ) & lt ; hypertext transfer protocol: //www.kgs.ku.edu/Publications/Bulletins/Sub9/page2.html & gt ;

LexisNexis, Minerals Exploration and Prospecting ( 11 August 2011 ) hypertext transfer protocol: //www.lexisnexis.com.au/pdf/exploration.pdf

National Offshore Petroleum Titles Administrator, Joint Authority ( January 2012 ) & lt ; hypertext transfer protocol: //www.nopta.gov.au/joint_authority.html & gt ;

United Nations, Convention on the Law of the Sea ( 1982 ) a 56 & lt ; hypertext transfer protocol: //www.un.org/depts/los/convention_agreements/convention_overview_convention.htm & gt ;

U.S. Geological Survey, Fact Sheet 70-03 Heavy Oil and Natural Bitumen ( August 2003 ) & lt ; hypertext transfer protocol: //pubs.usgs.gov/fs/fs070-03/fs070-03.html & gt ;

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