OFFSHORE PETROLEUM EXPLORATION IN AUSTRALIA ACREAGE BIDDING SYSTEMS: WORK BIDDING OR CASH BIDDING?

Abstract

The design and efficiency of offshore petroleum acreage bidding systems bear directly on the risk and cost for participants investing in exploration and development projects offshore Australia.

Companies, financiers and investors who are interested in investing in petroleum exploration and development activities will find a mixed regime of State and Federal legislation governs such activities in Australia.

While the concept of the work program bidding system appears to be sound, the administration of it by the Joint Authorities and Designated Authorities and delegated officers potentially creates many uncertainties for permittees.

The approval process is generally a costly and time consuming one under the work program bidding system and its administrative cost diverts funds that otherwise may have been directed to exploration activities.

Work program permits are also susceptible to uncertainty and dispute as to whether or not the required work program has been met. Issues of proper or improper exercise of discretionary powers can arise, particularly when wide statutory discretionary powers are in practice circumscribed by Administrative Guidelines.

The existence of statutory and administrative discretion requires, in the interests of natural justice, that there be appropriate avenues of appeal for aggrieved permittees. All of the foregoing regulation and cost is removed with cash bid permits. Cash bid permits not only reduce costs for Government but also for industry.

The authors are of the view that offering permits by way of the cash bidding system should be reintroduced, with modifications to ensure its efficiency.