APPEA: New Australian Exploration Spending Data is an Urgent Wake-Up Call

APPEA: New Australian Exploration Spending Data is an Urgent Wake-Up Call
The Australian Petroleum Production and Exploration Association (APPEA) says the latest official data on petroleum exploration spending is an urgent wake-up call for state governments and industry.

The Australian Petroleum Production and Exploration Association (APPEA) reported Monday that the latest petroleum exploration expenditure data released by the Australian Bureau of Statistics (ABS) is an urgent wake-up call for state governments and industry.

APPEA Chief Executive Dr Malcolm Roberts said the ABS data confirms that oil and gas exploration, both onshore and offshore, is in free fall.

"Over the last two years, spending on onshore and offshore exploration has fallen by almost two-thirds," he said in the press release.

ABS reported earlier Monday that the trend estimate for Australia's total petroleum exploration expenditure fell to $242.6 million (AUD 318.4 million) in the June 2016 quarter, down 19.4 percent or $58.5 million (AUD 76.8 million) from the corresponding period last year. The bureau added that exploration spending on production leases decreased 31.2 percent ($20 million or AUD 26.3 million), while exploration expenditure on all other areas was down 12.7 percent ($30 million or AUD 39.3 million).

Western Australia was the largest contributor to the decrease in the trend estimate, down 14.9 percent or $34 million (AUD 44.6 million).

According to the ABS, the trend estimate for onshore petroleum exploration expenditure declined 35.1 percent ($25.6 million or AUD 33.6 million) to $47.2 million (AUD 62.0 million) in the June 2016 quarter, while spending on drilling activities fell 32.7 percent ($10.4 million or AUD 13.7 million) and other onshore petroleum exploration expenditure declined 34.3 percent ($14 million or AUD 18.4 million).

Meanwhile, the trend estimate for offshore petroleum exploration expenditure was 13.2 percent lower (equivalent to $30.2 million or AUD 39.6 million) to $198 million (AUD 259.8 million), while spending on drilling decreased 9.1 percent ($14.6 million or AUD 19.2 million) and other offshore petroleum exploration expenditure fell 23.0 percent ($15.5 million or AUD 20.4 million).

"While some of this fall reflects lower costs, exploration activity is undeniably at its lowest levels for many years. The number of exploration wells drilled offshore is at its lowest level in almost 20 years; onshore drilling is at its lowest level in 15 years ... The latest data continues a worrying trend that has been evident for many years, even when commodity prices were much higher. If the slide in exploration continues, Australian gas users will face more uncertainty about future supply and higher gas prices."

APPEA supports the government's initiative to examine the exploration and development framework through the Offshore Resource Management Review, particularly the focus on frontier regions and less-explored areas that may offer significant untapped potential.

It added that the $76.2 million (AUD 100 million) in new funding for Geoscience Australia, announced in the last federal budget, is a very important initiative.

"The recent Council of Australian Governments' Energy Council meeting highlighted the urgent need to develop new gas reserves, given the likely supply shortfall in 2019. Production from the key basins in South Australia and offshore Victoria will begin to fall from 2017. We must find and develop new supplies of gas to offset falling output from Australia's long-established gas fields," APPEA said.

The industry organization commented that the latest exploration data published by the ABS is another reason to reject short-term political fixes such as the Victorian government’s ban on onshore gas exploration.

Chee Yew has covered the upstream and downstream sectors of the oil and gas industry in Asia for more than 15 years. Email Chee Yew at cheeyew.cheang@rigzone.com

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