SELECTING THE WINNING BID

Abstract

Work program bidding is established as the favoured method of allocating petroleum exploration tenements in offshore Australian waters and most of onshore Australia. However, the selection of winning bids can be complicated by the ranking of 2D versus 3D seismic, seismic versus drilling, program timing issues etc. On occasion the selection of the winning bids has been contentious. This paper summarises the process developed by the Petroleum Group in South Australia to select the winning work program bids for prospective onshore blocks for which bids have been gazetted. No other Australian jurisdiction has yet publicly released their detailed bid assessment processes.

Onshore acreage releases with work program bidding have been used in South Australia since the 1980s by Petroleum Group to:

focus industry onto specific prospective areas of the State (e.g. the Cooper Basin post expiry of PELs 5 and 6 in 1999);

maximise exploration commitments; and

achieve competition policy.

The South Australian Petroleum Act 2000 allows cash or work program bidding to be used depending on the acreage. Acreage releases are announced by Ministerial press release. Associated clear bid assessment criteria are published together with promotional material to aid applicants. The date and time for close of bidding are also established, usually allowing a 6–9 month acreage evaluation period, the timeframe depending on the volume of data involved, i.e. the exploration maturity of the area.

Applications received as a result of a gazettal process (i.e. competing bids) are assessed by a process designed to ensure probity and to achieve the over-arching aim of the bidding process i.e. the suitability of the applicants proposed work program for evaluating the prospectivity of the licence area and discovering petroleum.

A scoring system has been developed which establishes, for each bid what is effectively a risked net present value in well equivalents. In this system, guaranteed work scores higher than non-guaranteed work; early work scores higher than later work; wells with multiple targets are scored higher than single target wells; 2D and 3D seismic and other exploration activity is converted into well equivalents; and loading of the later, non-guaranteed years of work programs are heavily discounted.

The scoring system may also take into account differences in the amount and density of exploration data and minor variations may be made to the system to take this into account. It is intended that details of the scoring system to be used in bid assessment will be published each time bids are sought to ensure transparency and a level playing field.

Comparisons are made with acreage management philosophy and processes used by other regulatory regimes in Australia and internationally.