COMMERCIAL DEVELOPMENTS OF 1995

Abstract

The year 1995 witnessed the largest growth in world oil demand in recent history. This growth was driven principally by increased consumption in Asia. Despite this increased demand average oil prices rose only marginally due to both excess production capacity within OPEC and the expectation of the return of the Iraqis to the world oil market. Oil prices are unlikely to improve over the long term since the over-supply of crude is expected to persist well into the next century.

In Australia there was an increased reliance on imported oil, as consumption rose in response to an expanding economy whilst domestic liquids production continued to decline. The contribution of the Australian upstream industry continued to shift towards Western Australia as production from the Carnarvon Basin rose, whilst Bass Strait declined. Gas production rose for the year although the LNG facilities on the Burrup Peninsula are now working at full capacity. Further growth in LNG sales will require facilities expansion and such plans were well advanced over the course of last year.

The profitability of the upstream oil and gas sector continued to be poor, despite the positive signs within the West Australian market. This situation is unlikely to change in the short term as the over-supply of crude is expected to hold down oil prices. The long term viability of the E&P industry in Australia may well depend on further modification of the current fiscal regime.