Australia Introduces Tax Incentive for Offshore Exploration

The Treasurer and the Minister for Industry, Tourism and Resources report that the Australian Government introduced a taxation incentive designed to encourage petroleum exploration in Australia's remote offshore areas.

The measure allows an immediate uplift to 150 percent on petroleum resource rent tax (PRRT) deductions for exploration expenditure incurred in designated offshore frontier areas.

The 150 percent uplift applies to pre-appraisal exploration expenditure in the initial term of the exploration permit granted for a designated area.

Uplifted expenditure will also retain access to the transferability and annual uplift provisions of the PRRT.

Australia has some 40 offshore basins that display signs of petroleum potential, but half remain unexplored due to the cost and high-risk nature of exploration in remote frontier areas.

This measure lowers the cost of petroleum exploration in frontier areas, thereby providing an incentive to explore in Australia’s remote offshore areas and increasing the probability of discovering a new oil province.

This measure applies to the annual offshore acreage releases for 2004 to 2008.

Under this measure, the Minister for Industry, Tourism and Resources may allocate up to 20 percent of each year’s offshore petroleum exploration acreage release areas as designated frontier areas.

In particular, designated areas will be more than 100 kilometers from an existing commercialized oil discovery and will not be adjacent to an area designated in the previous year’s acreage release.

The 2004 offshore petroleum exploration areas were announced on March 29, 2004. Further to that announcement, the following areas will be designated as frontier areas for the purpose of this measure:

  • T04-5 located off the west coast of Tasmania near Port Davey in the Sorell basin.
  • W04-2 and W04-4 located on the deep water frontier areas of the Exmouth Plateau, over 400 kilometers west of Karratha.
  • W04-15 and W04-16 which begin around 70 kilometers west of Shark Bay in the Houtman Sub-basin, part of the northern Perth basin.
  • NT04-3 located in the eastern Timor Sea about 300 kilometres north of Darwin in the Northern Bonaparte Basin.

  • All of these areas remain open for bidding until March 31, 2005.

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