Proactive Investors is reporting live from the Australian Petroleum Production and Exploration Association’s 2012 oil and gas conference in Adelaide, South Australia from 13 May to 16 May.
Australian Petroleum Production and Exploration Association chairman David Knox has said that while there are strong opportunities for further investment in Australia’s oil and gas industry, it needed the Government’s support.
“The total investment in Australia’s oil and sector in the period to 2020 is estimated to be $330 billion,” he said during the APPEA 2012 Conference in Adelaide today.
“This represents a massive 60% of the total projected resource industry investment in Australia over that period.”
However, he said that while Australia was playing host to enormous investments in the oil and gas industry, it needed a stable fiscal and regulatory environment to facilitate investment growth.
“We recognise the fact and respect the right of governments to make new policies,” Knox, who is also the managing director of Santos (ASX: STO) said.
“But governments need to be conscious that projects are competing for investment dollars globally. I’m talking here about attracting the biggest global companies in this sector, securing investment from shareholders both locally and overseas, or as some have done – overseas capital.”
He pointed out that investment confidence could be easily undermined by the combination of continuing and significant policy changes that would impact the economics of projects that had already been given the green light and hamper those in the planning stage.
“Even if those changes do not come to fruition it is this ongoing discussion of further changes which is undermining confidence.
“With such massive capital investment and therefore risk up-front, long-term investors like those in the oil and gas industry need stable, predictable, long-term rules. This stability, to put it bluntly, is what you need to drill holes.”
He pointed to the North American gas industry as an example, saying that when U.S. gas prices rose amidst a stable environment, the industry responded by drilling more holes that in turn unlocked large gas resources and brought gas prices down.
“Compared to North America, we must remind ourselves that Australia is not a low-cost investment destination. And as costs increase locally, new global competitors are emerging.
“The United States has just approved a new project to export LNG. The competitive threat presented by projects being developed in East Africa and the Middle East continue to build.
“In this environment, our Members’ job remains to deliver projects on budget with good economics.
“Success in project delivery is fragile. Key to this success is our ability to deliver on the promises we made to our investors.
“Delay and uncertainty at this time risks seeing other projects leapfrog Australian projects. With the LNG industry characterised by contracts which are typically decades long, the cost of delay could be massive.
“My clear message to the Australian Government is: do not create uncertainty.
“Instead, provide our investors with the confidence in Australia as a stable fiscal and regulatory region – allow us to stay competitive.”
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