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Australian oil & gas producers call for new policies to stimulate sector

23 July 2013

David Byers, chief of the Australian Petroleum Production and Exploration Association (APPEA), has called on politicians to show economic leadership and introduce policy reforms to help the sector. He said the sector was building around $200 billion worth of projects in Australia, with the potential to invest another $100 billion, but warned that policy changes were required.

“Australia’s attractiveness as a place to invest is under enormous pressure. Unless the next Australian parliament can work with industry to rectify this, the next generation of Australian LNG projects may never be built,” Byers said.

“The Australian oil and gas industry created 100,000 jobs last year and is looking to generate this many again in the decade ahead. However, the costs associated with delivering Australian LNG into key markets is now substantially higher than for projects in East Africa or North America.”

Byers said high taxes, lower labour productivity, bureaucracy and high environmental costs were all areas that needed to be addressed.

"Policymakers have failed to create a stable, predictable and competitive taxation regime. Regulatory processes for approving projects are becoming increasingly inefficient. And there are serious weaknesses in the development of a skilled workforce and support industries’ supply capacity," he said

A new report commissioned by the Minerals Council of Australia highlighted policies that had the capacity to impact the sectors capacity to grow and create jobs including budget policy and tax, energy and climate change, land access and environmental approvals, and infrastructure policy.

"There has been a significant reduction in the capacity, capability and competency of government agencies," the report said, adding that audits resulted in a plethora of review processes rather than efficiency reforms.

Earlier this year the oil and gas sector warned that billions of dollars worth of investments could be lost if the high cost of building major projects is not fixed in eighteen months. The industry said tens of thousands of jobs could be lost along with billions in potential revenue if the LNG industry in particular did not become more competitive.

"There is an 18 to 24-month window in which to do so and it will require a significant structural change in Australia's costs,” Chevron Australia's managing director Roy Krzywosinski said.

Incoming Shell Australia chair Andrew Smith called on the nation's leaders to recognise problems with industrial relations in particular.

If these problems are addressed, the LNG boom in Australia could lift Australia from the fourth largest LNG producer to the first, overtaking Qatar. In Queensland alone three projects currently under construction are expected to generate A$45 billion in capital expenditure and produce 28.8 Mtpa of LNG, with the first project expected to export its first shipment late next year.

However industry insiders say that without important policy changes, Australia will lose market share to low-cost competitors such as the USA, Russia, and East Africa, which are all targeting China and East Asia, Australia’s key market.

“We remain optimistic about the Australian investment environment but it requires significant national leadership to improve our international competitiveness including fiscal stability, increased productivity and industrial relations changes that focus on Australia’s long term interests,” Krzywosinski said.

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