The report is an analysis and evaluation of Australian petroleum exploration policy in the national interest. Broad policy objectives are defined after consideration of world petroleum supply, demand and reserves. It is concluded that while Australia is currently self-sufficient in petroleum, it is likely to become substantially reliant on petroleum imports in the early 1990's and almost totally dependent on imports by the year 2000. World petroleum supplies are expected to last well into the next century and the supply of Australia's import needs up to that time is expected to be adequate.
Australia's prospectivity for petroleum is also examined and it is concluded that undiscovered resources are likely to be off-shore and small by world standards yet capable of significantly reducing the need for petroleum imports. For this reason, Australia needs an efficient exploration industry, but must also develop strong export industries to pay for future petroleum imports.
Efficiency is considered to require the freedom for market forces to allocate factors of production (capital, labour, etc.) to competing industries. It is also considered that the benefits of resource development which accrue to the Australian people must be maximised.
A review of the current state of the petroleum exploration industry reveals a high degree of State and Federal government regulation, and a complex and inefficient system of secondary taxation. In particular, the Federal system of excise duty on crude oil is considered to be a major deterrent to marginal production and development. There is also scope for improving the availability of high risk exploration capital by encouraging the formation of drilling funds. It is considered that the Australian economy would benefit from a progressive and sizeable opening up of the industry to market forces.
The most beneficial system of secondary taxation for future exploration is considered to be a resource rent tax with bonus bidding, however, retrospective application of such a system to existing production is not supported. The existence of both State and Federal constitutional rights with respect to petroleum resources is seen as a major barrier to achieving uniform, equitable and efficient taxation of the industry.