PRESS STATEMENT by the Minister for National Development m

THE GOVERNMENT'S ENERGY POLICIES - PETROLEUM PRICING

The Minister for National Development,  Mr Kevin .

Newman,  said in Canberra today that it was essential, for

Australians to face up to the fact that the days of cheap

petrol were over. There was a critical need for

-  conservation of liquid fuels and recent increases in the

prices of petroleum products needed to be seen as a major

step in encouraging conservation.

Mr Newman said that in the implementation of energy

policy generally, energy pricing,  in particular the pricing

of petroleum products,  was of fundamental importance.

Realistic pricing will Influence consumption of petroleum

products and encourage exploration for and development of

additional petroleum resources.  It is essential that the

prices to which both producers and consumers react reflect

realistic values.

' The Government's recent action on crude oil levies

flowed directly from its energy policy statement of

November 1977. In that statement,  the Government had

identified its principal energy policy objectives as:

.  moving crude oil prices towards import parity;

.  restraining the rate of growth of energy

consumption, particularlyÂ·in liquid fuels;

.  achieving the highest practicable level of

self-sufficiency in liquid fuels;

.  developing economic oil and gas reserves;

.  encouraging major export projects;

.  providing support for increased energy research

and development.

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The first, and in some ways the most basic, target

of m ov i n g  crude oil prices towards international parity l e v e l s ,

has n o w  b ee n  achieved, as far as into- re fi ne ry  prices are

c o n c e r n e d .  This means that, in f u t u r e , consumers w ill  be -

p a yi n g  prices for p e t r o l e u m  products w h i c h  take into account

the r e p l a ce me nt  v a lu e  of crude oil consumed in Australia.

This decision will be of fundamental importance  in

e s t a b l i s h i n g  rea li st ic  attitudes in the c ommunity in r e l a t i o n

to u sage of p e t r o l e u m  products.

C o n s e r v a t i o n  of p e t r o l e u m  p ro ducts w il l  be e nc ou r a g e d

by the G ov er nment's latest, p r i ci ng  i n i t i a t i v e s .

The G ov er n m e n t  has recognised, h o w e v e r , that w h i l e

a pp ro priate energy p r i c i n g  is a basic p re - r e q u i s i t e  for

s uccessful energy conservation, the o p e r a t i o n  of market

forces m a y , in A u s t ra li a as in other c o u n t r i e s , need to be

s u pp lemented by other forms of action. In particular,

consumers n ee d  to be mad e aware of the scope for energy

s a v i n g s , and of the most effective m eans  of ach ie vi ng  such

s a v i n g s . .

Ã¢ÂÂ¢  To this e n d , the recent Budget includes p r o v is io n

of $50,000 for p reliminary r es ea rc h and p la n n i n g  for a

n at ional energy c o n se rv at io n p u b l i c i t y  campaign. The

p u b l ic it y campa ig n w o u l d  r ep resent the m a i n  a ct ivity in

the first stage of a c o- or dinated n at ional en er gy  conservation,

program, w h i c h  was endorsed by C o m m o n w e a l t h  and State En er g y

Mi ni st er s at a recent m e e t i n g  of the A u s t r a l i a n  Minerals and

E ne r g y  Council. *

A p ar t f ro m  the c on se r v a t i o n  a s p e c t s , w h i c h  h ave b ee n

r e fe rred to a l r e a d y , the move to full import parity for

indigenous crude oil w ill also be of importance in another

way, in. that it w ill help to remove distortions  in industrial

u sa ge patterns w h i c h  have r e s u l t e d  f rom m a i n t e n a n c e  of an

a rt i fi c i a l l y  low indigenous price for crude oil and c on se q u e n t l y

p e t r o l e u m  products.

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For instance,  low indigenous crude oil prices have

retarded the competitive penetration of locally available

natural gas into the fuel oil and diesel oil market,

especially in the Sydney area. The latest pricing moves

would provide improved opportunities for locally produced

natural, gas to compete with, fuel oil derived from valuable

crude oil.

Increased usage of natural gas, consistent with

price relativities,  would help conserve liquid fuels and

encourage an optimisation of product output from a given

input of crude oil. At the same time, utilisation of

locally produced natural gas as an alternative fuel to

liquid petroleum fuels offers advantages in relation to

import requirements and the balance of payments.

If market factors result in a surplus of fuel oil.

other alternatives for disposal need to be considered

including export opportunities.  .

While it is important to conserve and use wisely

the energy resources currently available to us, it remains

desirable to promote the discovery and development of

additional energy resources,  particularly of petroleum.

The pricing and taxation incentives previously introduced

by the Government - which, together with the latest decision

on pricing, form part of an overall approach - have been

successful in promoting a revival in the Australian petroleum

exploration industry. .

Already this year more, exploration wells have been

drilled than in any of the past three years.  So far this

year, 27 exploration wells have either been completed or

are in progress.  Offshore, there are now 59 current

exploration permits, and minimum exploration commitments

for the next five years are in excess of $400 million.

Interest is especially centred on the Exmouth Plateau off

Western Australia where companies are engaged in the most

intensive deepwater exploration anywhere in the world,

operating at the limits of existing technology.

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Onshore, there tire m ore  than 70 current p e t r o l e u m

e x p! or at io n permits, m os tl y in "Western Aus tr al ia  and Queensland.

Exp i  oration interest j.s focussed in particular on the Cooper Â· '

Bast n. of South Australia and the Surat Basin of Queensland.

Recent: announcements of drilling campaigns in these areas

have indicated promising results. Â·  .

On the development side, it is worth noting that,

as a result of Government polici.es, the Bass Strait producers

made a decision to bring forward the-date of commencement of

Ã¢ÂÂ¢production from the Mackerel field - with production beginning

in late 1977. The development of the Tuna oil field and the

Snapper gas field are also well under way. In addition, the

Cobia-2 subsea completion will be brought on stream before

the end of this year. The producers have also announced that

development of the West Kingfish field will commence in 1979,

with initial production possible by 1982. The development of

all these projects is estimated to cost $700 million.

As a re suit, of the Government.'s policy initiatives,

the projected level of self-sufficiency iu crude oil supplies

in the mid-.1980's - at around 45 per cent - is now higher than

previously estimated. further improvement in the self-sufficiency

ratio would be in the national interest.

Finally, as part of its integrated approach to the

energy problem, the Government: is taking strong action to

stimulate increased research and development on energy matters.

About $15 million will be available in 1978/79 to encouarge

a major expansiont  of energy research and development, in

Australia. ’

The Budget makes a. cash provision of $4 millionÂ· for ,

research grants expenditure in 1978/79 and to cater for 'longer

term projects, the Government is prepared to commit a further

$5 million against expenditure in future -years. Additionally,

about $6 million, representing accruals and reserves in the.

Coal Research Trust: Account, will be. available for coal research.

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These funds are in addition to those, available to

CSI.RO, the Australian Atomic Energy Commission and other

Commonwealth authorities,  which in 1976/77 expended a total

of about $14.5' million on energy research and development.

The additional funds not only represent a very

significant increase in Commonwealth support generally but

also provide for a substantial, broadening of opportunity

to encourage more research by a wide range of interested

groups, including State bodies and private enterprise.

Concern with energy problems and interest in energy

research and development is, oÂ£ course, very much an interÂ­

national matter, and no single country can hope to remain at

all the frontiers of energy technology purely on the basis

of its own efforts. The Australian Government is therefore

pursuing co-operation agreements with other countries which

are involved in energy research and development activities

of mutual, interest.

Agreements on coal research have been concluded with

the United Kingdom and the U.S.A,,  a solar energy agreement

is currently being negotiated with the U.S.A.. and an

agreement with Japn to co-operate, in 1.he fields of coal

utilisation, solan energy, and energy conservation was

announced recently. International co-operation is a two-way

street, and Australia must maiptain a significant: energy

research and development effort of its own in order to

participate in jo,int projects and appreciate information we

gain from other courttries. .

Canberra .

12 September 1978

