Western Australia’s Offshore Petroleum Industry

The 2020 offshore petroleum exploration acreage release highlighted the importance of Western Australia to Australia’s oil and gas industry. WA is home to three of the five basins holding the newly-available exploration acreage, which comprised 42 areas in Commonwealth waters, spanning ~100,000 square kilometres.

WA produces crude oil, condensate, liquefied natural gas (LNG), natural gas and liquefied petroleum gas (LPG) for the domestic and international markets.  The vast majority is produced offshore.

WA is Australia’s largest producer of hydrocarbons, accounting for around 50 percent of the nation’s output. In 2019-20, WA’s crude and condensate production was 121 million barrels, accounting for 80 percent of Australia’s output. Natural gas production, including LNG, was 77 billion cubic metres, which was 54 percent of Australia’s total production volumes.

LNG is the State’s highest value petroleum product. In 2019, WA produced 13 percent of the world’s LNG volumes. WA’s contribution helped Australia overtake Qatar to become the world’s largest exporter of LNG, which is becoming an increasingly important part of the global push for emissions reductions as a cleaner and economic fuel option.

A major economic impact

There is no doubting the significant economic contribution WA’s oil and gas sector makes to the State and nation, delivering economic wealth, jobs, high wages, investment and tax revenues.

Minerals and petroleum accounted for 94 percent ($170.9 billion) of the State’s merchandise exports in 2019.

The Department of Mines, Industry Regulation and Safety’s 2019-2020 figures show WA’s petroleum sector was worth $37 billion. LNG is the most valuable petroleum product produced in WA at $27 billion or 72 percent of petroleum sales, followed by condensate at $5.7 billion (15 percent) and oil at $2.6 billion (seven percent).

As of September 2020, WA had minerals and petroleum projects in the pipeline valued at an estimated $129 billion. Of that, the petroleum sector had almost $7 billion in projects committed or under construction, and $63 billion in planned and possible projects.

It’s a very valuable sector to WA in terms of exploration and investment. In 2019-20, WA’s petroleum exploration expenditure was $596 million, representing a 47 percent share of Australia’s overall expenditure of $1.3 billion. The chart below shows the significant level of petroleum exploration expenditure in WA over the past decade.

In 2019-20, the State’s mineral and petroleum industries were responsible for 73 percent of all new capital investment in WA.

Australia’s oil and gas industry is a high employer within the wider resources sector, for which direct employment in the years between 2005 and 2018, had more than doubled from 104,000 to 255,800.

Estimates by APPEA and the ABS predict the number of direct and indirect petroleum sector jobs to be 80,000 across Australia,[1] with many more in the manufacturing sector.

Years of petroleum experience

Oil and gas exploration have been conducted in resource-rich WA for many years. Initial oil exploration took place in WA’s south west in the early 1900s. The first formal exploration was carried out by the Australian Motorists Petrol Company (AMPOL) in 1946. The Bureau of Mineral Resources (BMR) initiated survey work for the Federal Government that same year.

AMPOL was awarded the first two WA Exploration Permits near Exmouth in 1947. Under a joint venture, AMPOL and Standard Oil formed West Australian Petroleum (WAPET) and made WA’s first oil discovery at onshore Rough Range near North West Cape in 1953.

Offshore activity commenced in 1967 in the North West Shelf region. Exploration at the time was oil-focused, but gas shows were soon encountered, leading to major discoveries over the following decade, including Goodwyn, North Rankin, Angel and Scarborough.

Oil discoveries such as Harriet and South Pepper in the 1980s changed the perception that the North West Shelf was particularly gas-prone. Numerous oil discoveries since then have been made in the Northern Carnarvon Basin.

Shared resources, shared benefits

Today, most of WA’s offshore petroleum activity falls within the jurisdiction of the Commonwealth Government. The jurisdictional boundaries in place denote that all activities outside a three nautical mile zone from the WA coast are primarily regulated by the Commonwealth Government and activities within this zone are regulated by the WA State Government.

Offshore royalties are shared between the State and Commonwealth in accordance with the relevant legislation.

Western Australia’s own oil and gas provinces span across eight sedimentary basins. The State’s sedimentary basins, including the continental shelf, cover an area of approximately 2.5 million km2.

Of the eight, five comprise offshore sections, which fall in both State and Commonwealth waters.

WA’s basins include:

On and offshore

  1. Carnarvon Basins: in the Gascoyne region and off the Pilbara coast (this comprises the Northern Carnarvon and Southern Carnarvon Basins)
  2. Perth Basin: in the South West and Mid-West of Western Australia
  3. Canning Basin: in the North West, Pilbara and central regions

Offshore

  1. Bonaparte Basin: off the Kimberley coast
  2. Browse Basin: off the Kimberley coast

Onshore

  1. Officer Basin: in the central desert
  2. Ord Basin: in the Kimberley region adjacent to the State border with the Northern Territory
  3. Eucla Basin: in the southern Goldfields region

Commonwealth-controlled basins offshore WA include:

  1. Offshore and marginal basins of the Arafura Sea: Carpentaria, Arafura and Money Shoals basins
  2. North West Shelf: Bonaparte, Browse, Offshore Canning, Roebuck and Carnarvon basins and Wallaby Plateau).
  3. Southwestern margin: Mentelle and Perth basins, Wallaby (Cuvier) Plateau and the Naturaliste Plateau.

A strictly regulated industry

The WA Government has regulated the State’s oil and gas industry since the first on and offshore drilling activities in the early 1900s.

Today, responsibility for the oil and gas industry’s regulation lies with the WA Government’s  Department of Mines, Industry, Regulation and Safety (DMIRS). It regularly updates legislation, regulations and guidelines that the industry must adhere to and abide by.

Overall, DMIRS is charged with ensuring the highest levels of safely, health and environmental standards, and community priorities in accordance with State and Federal legislation, regulations and policies.

All of Australia’s Commonwealth waters are regulated under the Commonwealth’s Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGGS Act) (area 4).

In the offshore area of WA these areas continue to be regulated by a Joint Authority arrangement between the Offshore Resources Branch of the Department of Industry, Science, Energy and Resources and DMIRS.

The National Offshore Petroleum Titles Administrator (NOPTA) is responsible for titles administration functions and the National Offshore Petroleum Safety and Environmental  Management Authority (NOPSEMA) regulates environment and safety matters.

[1] APPEA estimates, ABS catalogue number 6291.0.55.003 Labour Force Detailed, May 2020

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