SA Mines and Energy Journal : October-November 09
OCTOBER/NOVEMBER 2009 SA MINES & ENERGY JOURNAL 31 LEGAL Amajor overhaul in the regulation of the petroleum industry in South Australia was implemented through the Petroleum Act 2000 (SA). It replaced legislation enacted in 1940 when the petroleum industry was still in its infancy, introducing a modern and flexible framework to accommodate further development. However, after nine more years of industry advancement, areas for improvement have been identified. The Petroleum (Miscellaneous) Amendment Act 2009 (SA) was passed by Parliament on July 15 this year and was expected to become fully enacted in September. It creates a new structural approach to licensing, further accommodates areas of significant growth in the energy industry and deals with the following issues. Coal to liquids Australia is a net importer of crude oil, with domestic production of crude oil and liquefied petroleum gas meeting only 53 per cent of domestic consumption. 1 Understandably, this has led to interest in the coal-to-liquids, or CTL, process to derive a clean-burning fuel from abundant domestic coal reserves. To accommodate this emerging technology in South Australia, the definition of petroleum has been amended to encompass a product of coal gasification undertaken for the purposes of synthetic petroleum production. Geothermal energy South Australia is experiencing growth in the area of geothermal energy. Geothermal energy exploration licences have increased significantly from a total area of just 1487 square kilometres in April 2002 to 95,766 square kilometres in March 2009, with a further 29,116 square kilometres currently under application. Given the increased activity in the geothermal energy area, it is appropriate that following the introduction of a new geothermal energy licence category, the Act is to be renamed the Petroleum and Geothermal Energy Act 2000. In addition, the new geothermal licences will significantly increase the maximum area available to geothermal energy producers. Geothermal Exploration Licences will now be for a maximum area of 3000 square kilometres, with Geothermal Production and Retention licences increasing from 100 square kilometres to 1000 square kilometres. Gas storage Gas storage has also assumed greater significance since 2000. Depleted natural reservoirs have been commonly used for gas storage by the petroleum industry in order to secure gas supply. However, the capture and storage of carbon dioxide (CCS) in such reservoirs may emerge as an important tool in climate change mitigation. While a comprehensive framework for CCS is yet to be enacted in South Australia, the introduction of new Gas Storage Licences will go some way to facilitating these activities. Associated facilities and services A new Special Facilities Licence has been introduced to provide scope for entrepreneurial investment and competition for associated facilities and services. A Special Facilities Licence will authorise the licensee to establish and operate a facility to process any regulated substance or generate energy from a geothermal source. Compatible licences A new compatibility regime will allow licences with respect to petroleum, geothermal energy and gas storage to be held over one area. Currently, petroleum and geothermal licences are compatible, but there has been some difficulty since 2000 in allowing third- party gas storage operations. A new Gas Storage Licence will be compatible with a new Petroleum Production Licence, enabling stand-alone gas storage operations to be undertaken simultaneously with petroleum production. The introduction of the Gas Storage Licence was a concern for Petroleum Production Licence holders who enjoy an uninterrupted right to store gas. The transitional provisions have maintained the status quo by continuing to entitle a holder of a transitional Petroleum Production Licence to undertake gas storage activities. They will also be exclusively entitled to a new Gas Storage Licence over that area. 1 Australian Bureau of Agricultural and Resource Economics Energy in Australia 2008. Industry growth fuels changes Recent amendments to petroleum laws introduce a new licence structure to meet the needs of major growth areas, writes Andrew Corletto, Corporate and Resources Partner at Kelly & Co.