Chapter 2: History of petroleum exploration and development - PIRSA

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Petroleum geology of South Australia. Vol. 4: Cooper Basin.THE MODERN DECADEThe licence area and the ProducersIn 1979 the exploration rights granted to Delhi–Santoshad been modified when the companies volunteered to halvethe area covered by PELs 5 and 6 to 284 086 km 2 . The areacovered was then divided into the Cooper, Pedirka andArrowie Sectors. The Cooper Sector is not subject to anyrelinquishment provisions until February 1999 when theexploration rights to the whole Cooper Basin expire withoutthe right of renewal. The Pedirka and Arrowie Sectors weresubject to relinquishment of 25% at five-year intervalscommencing in February 1984. Under the 1984 conditionsof renewal the area of PELs 5 and 6 was reduced to231 948 km 2 and Delhi–Santos were required to drill 54wells and acquire 4000 km of seismic in the Cooper Sector.In subsequent years additional voluntary minorrelinquishments were made until February 1989 when thearea of PELs 5 and 6 was halved again (to 111 756 km 2 ).Within a year the area was again reduced (to 73 202 km 2 ) andminor reductions to the exploration zone in the PEL areahave followed: the area of a PPL is excised from theexploration licence when a PPL is issued.The Brown Liberal Government (1993–96) confirmed in1995 that no rights of renewal would apply to existingCooper Basin exploration tenements on their expiry in 1999.This policy was intended to facilitate active upstreamindustry competition in gas exploration and supply as bidswould be sought for new tenements from the industry atlarge. The more than 80 PPLs then existing over about3500 km 2 were not to be affected by the expiry of PELs 5and 6. But in September 1997 Premier J. Olsen (1996–)announced that the Liberal Government agreed to allowSantos to retain tenure over the Nappamerri Trough until atleast 2013. In accord with their rights under the RatificationAct, in November 1997 Santos and its partners were issuedwith 17 PPLs over the Nappamerri Trough (Fig. 2.6). Thelicences cover an area of about 4100 km 2 and contain apotentially large resource of gas in very low permeabilityreservoirs. The company will have to spend more than$100 million over 15 years to retain all of this area until2013. Partial acreage relinquishment will apply at the end offive and ten years and relinquishment requirements willapply in 2013 to any areas where commercial production hasnot been established.As operator Santos is now responsible for 13 jointventures, the Cooper Basin Producers Unit and theDownstream (for the transport, processing and storage ofliquids at Port Bonython) Agreement in South Australia.Until late 1996 each share (a participation factor) in theProducers Unit reflected the net quantity of gas, ethane,condensate and so on and the quantity of reservescontributed by that company (Fig. 2.7). The reserves wererecalculated biannually and the participation factor changedin response to new discoveries and adjustments to reserves’estimates, among other things. The complex arrangementhad led to court proceedings more than once. After twodecades the review and adjustment method of establishing acompany’s share was discarded. The arrangement wassimplified by instituting a fixed participation factor for bothexploration and production interests and for all petroleumproducts within PELs 5 and 6 (the exception being theGoal attainment scaling applied to the environmental assessmentof abandoned petroleum wellsites. (top) -2 score (much less thanexpected outcome): the track is prominent because of a scrapedsurface, windrows along its edges or gully erosion. (bottom) +2score (much more than expected outcome): the track contours andcolour blend with the surroundings and the earthwork disturbanceis indistinguishable. (Photos 45045, 45049)Patchawarra East Block, which retained its existinginterests). Fixed participation factors were also applied tothe Downstream Agreement. The change has reduced boththe time and cost involved in the review process and thepotential for litigation.In regards to the agreement to supply Cooper Basin gasto AGL (Fig. 2.8), in 1995 the Australian Competition andConsumer Commission (ACCC) initiated a review of its1986 authorisation of the agreement. Although theagreement is shielded from the provisions of the TradePractices Act by the Ratification Act, authorisation had beengiven previously to enable holding any gas price arbitrationunder the agreement in New South Wales instead of SouthAustralia. In 1996 the ACCC determined that theAgreement contained three anti-competitive clauses(providing for first right of refusal, take-or-pay andexclusive dealings). Accordingly the authorisation waswithdrawn excepting for a time-limited authorisation of agas price establishment clause. In 1997 the Producers wontheir appeal to the Australian Competition Tribunal againstthe determination (PESA News, 1998).RoyaltiesIn the late 1980s the State Government had taken theview that South Australia should not receive less royalties32
Petroleum geology of South Australia. Vol. 4: Cooper Basin.QUEENSLAND139°30´ 141°Current PPLs as at 31st July 1998Nappamerri Trough26°$MILLION1000900800700PELs 5 & 6COOPER27°60050040030020010001970 1975 1980 1985 1990 1995FINANCIAL YEAR98-111198-1110Fig. 2.6 PPL holdings at 30 June 1998.% MoombaBASIN0 50KILOMETRESNEW SOUTH WALESthan those applicable under comparable interstate situations.Under the Ratification Act and Indenture, the Governmentreceived a 10% royalty on the value at the wellhead lessdeductions for capital and operating expenses for processingand treatment, and related financing arrangements. TheMines and Energy Department had calculated that the futurereturn from the region would be less than 5% of the sellingvalue of the petroleum: the equivalent value under interstaterates was up to 2% more. Thus in August 1989 a review ofthe royalty rate was initiated with the Producers.After considerable negotiation the Government reachedagreement with ten of the eleven Producers (Delhidissented) to increase the royalty payments by reducing thedeductions allowed to companies for the wellhead valuecalculation while retaining the 10% royalty rate. Underamendments in 1991 to the Ratification Act a new royaltyregime, payable monthly instead of six-monthly, wasintroduced from January 1991 (Fig. 2.9). In order tofacilitate enhanced oil recovery schemes and therehabilitation of abandoned production facilities, theGovernment allowed the Producers to deduct downstreamrestoration costs and the drilling costs for non-petroleumproducing wells. The royalty scheme was also applied tothree small producing fields of the Producers outside theIndenture area.28°29°Fig. 2.7 Cooper Basin petroleum sales.As well as generating additional revenue for theGovernment annually, the new royalty system resulted in asmall rise in the price of gas: under the gas sales contracts,increases in royalties applicable to PASA flowed on to gasprices in South Australia. Although agreeing to the change,companies such as Santos and Sagasco Resources saw themove as a disincentive: they anticipated oil and gasexploration and development would fall generally and ceasein some areas. This did not happen because the disincentiveto exploration was rather small when contrasted with theprospectivity of the region and the gains to be made fromsuccessful exploration.The national arenaDuring the 1980s steps for the national sharing of naturalresources through dismantling barriers to trade were takenfor both electricity and gas. The concept of resource sharingwas not new: in 1961 the Federal Government had drawn upa plan for an electricity grid serving a large part of centraland eastern Australia through nuclear-powered generatorsand Connor had advocated a national gas pipeline scheme.That a national approach was practicable was demonstratedby Australia’s first interstate gas sales via theMoomba–Sydney pipeline (completed in 1976) and SouthAustralia’s involvement in the second interstate gaspipeline, from Moomba to Ballera in Queensland. TheFederal Government pursued a national natural gas strategyas part of its new federalism approach in 1991.The Tonkin Liberal Government (1979–82) in SouthAustralia had raised the possibility of piping oil and gas fromSouth-West Queensland to Port Bonython. Queensland'sNational – Country Party Government under J. Bjelke-Petersenrejected this proposition and decided instead to push for thebuilding of the Jackson–Moonie–Brisbane pipeline. But theprospect for interstate linkages remained attractive. SouthAustralia looked to expand its oil and gas pipeline networkboth within the State (the Wasleys – Torrens Island pipelineloop was commissioned in September 1986 and the PortPirie – Whyalla submarine pipeline came into operation inApril 1989) and beyond its borders. Thus in July 1991 aten-year contract was signed for the supply of gas fromnorthwest of Jackson to Moomba for the treatment and33
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Chapter 2: History of petroleum exploration and development - PIRSA

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