6/ 155
AUSTRALIAN'INDI GEOUS CRUDE OIL'
STATEMENT BY THE PRIME MI NISTER
I n September 1965 the Government announced certain policy
decisions regardin--the use of Australian indigenous crude oil.
Those decisions were a re-affirmation of the policy that the
Government was determined that local refineries use all the crude oil produced
in Australia, and an announcement that the price to be paid by refineries for
* Australian crude would be $ 3.14 cents a barrel at the customs port at the
refining centre nearest to the producin-field. Included in this price was 67
cents a barrel as an " incentive" payment.
This arrangement was to finish on September 17 197-and no
W" Cisions were announced as to what would happen after that date.
At that time the Moonie field was the only one in operdtion.
The production of the Moonie and Barrow fields was, and is, comparatively
small and the extra cost resulting from the crude oil they sell at $ 0.14 cents
a barrel, together with freight costs is already included in petrol prices in
Australia. Subsequently, very extensive oil fields were discovered in Bass
. Strait by Esso/ BHP. Oil from these fields should begin to flow in Aarch 196
and by September 1973 it is expected that the fields will be producing at over
253, 3 barrels of crude oil a day. During that period, this field may well
produce in the vicinity of 61 million barrels. The prospect of such large
quantities of oil which refineries had to buy at a price so much higher than the
O price of imported oil, obviously created a new problem and led to forecasts of
considerable rises in prices of petrol and other petroleum products.
0 Because of the effects that this would have throughout the
economy the Government has most carefully studied the various problems raised
and I nave for some time been engaged in a series of negotiations with Australian
oil producers and refiners.
I now wish to inform the House that the Government re-affirms its
policy that for a period of ten years beginning on September 18 1Q73 refineries
in Australia are to process Australian crude oil in order to provide the full
requirements of the Australian market for petroleum products.
This is of course subject to the need for sufficient imports to
meet the requirements in Australia f3r bitumen, lubricants and fuel oil in excess of
quantities that can be realised from Australian crude.
Secondly the Government announces as policy that for a period
of five years after September 17 1573 when the present policy arrangements
terminate the price that refineries will be required to pay Australian producers
will be import parity. Import parity is defined as the posted prices of overseas oil as of
today, less the discounts allowed off those posted prices as of today, plus
overseas freioghts at the most efficient and economic rates prevailing today,
plus wnarfage where applicable.
To this price will be added a sum for quality differential worked
qut by the modified Nelson method.
From the import parity price so arrived at will be deducted
a sum representation the averagefreight cost. ofAdelivering Australian
oil to the refineries from the port of delivery by the most economical means
possible. This will mean that as from September 1972, for a period of
five years, the price payable for Australian oil should generally be neither
higher, nor lower, than the price now payable for overseas oil except for the
effect of Australian coastal freights.
I now come to the period between March 1969 and September 197?
during which the present arrangement operates, during which the presently
applying high prices for Australian crudes were agreed to be paid, and during
which significant increases in the cost of petroleum products have been
suggested. SI have already said that the cost of oil from Moonie and Barrow
at these hi ; h prices has been absorbed in existing petrol prices, and no
alteration is to be made to the prices payable for oil from those fields until
after September 1970 when the import parity prices which I have described
will apply. In the case of the oil fields discovered by Esso/ BHP we have
agreed by negotiation that there will be a reduction in the prices Australian
refineries are required to pay up to September 1973.
Our agreement is that Esso/ BHP will altogether forego the 67 cents
a barrel known as the " incentive" allowance. In addition, Esso/ BHP will allow
refineries a further discount of 5 cents a barrel.
The result is between vlMarch 1969 and September 1973 the price
to be paid for this oil will be reduced from 14 cents a barrel to $ 2.42 cents
obarrel at the customs port at the refining centre nearest to the producing field.
After September 1970 the price payable for this oil will be import
parity as already explained. This will reduce the price payable still further.
To sum up, Mr. Speaker, the new arrangements made will mean
that the large newly discovered quantities of Australian oil to be used between
March 1369 and September 197 will cost 72 cents a barrel, or a little over 2 cents
a gallon, less than was previously anticipated.
After September 1972 the price payable for Australian crudes will
be no more than the price of imported overseas crudes today except for any extra
cost involved in coastal transportation.
This will not between March 1969 and September 197'. in
itself prevent any increase in the price of petrol. But it will undoubtedly
materially reduce the size of any rise that might take place.
I t. Ave so far spoken only of the pricini policy for Australian
crudes and of the Government's requirement that the Australian market should
be supplied from such crudes.
But we need to discover more oil in Australia.
The Government is therefore currently studying the sep t'rate
question of the need for incenitive for oil exploration in the period after
September 17 19711 Various proposals are under examination and we will in due
course announce the form of incentive, if any, which we will adopt.
In the meantime the arrangements I have just announced will
provide a firm basis upon which industry can plan ahead for the use of
Australian crudes and will reduce any future rise in the price of petroleum
j oducts.
CANBERRA-
* 13 October 19' 6!..