House of Representatives

Second Reading Speech

Mr GRIFFITHS (Minister for Resources)

I move:

That this bill be now read a second time.

The purpose of the Petroleum Excise (Prices) Amendment Bill 1990 is to amend the Petroleum Excise (Prices) Act 1987 to enable the calculation of a volume weighted average of realised prices of sales of crude oil, referred to as the Volware price. This calculation is required for the purpose of determining excise liability for excisable oil produced outside the Bass Strait producing area, including the Jackson oilfield located in south-west Queensland. The powers of this Bill are integral to the collection of crude oil excise under the Excise Tariff Act 1921 and Excise Act 1901.

As from 1 January 1988, when the decision to deregulate the oil market and to terminate the import parity pricing basis for levying excise was implemented, crude oil prices for the purposes of calculating excise liability have been determined by the Minister for Resources, or his delegate, under the Petroleum Excise (Prices) Act 1987 on the basis of the volume weighted average of realised-Volware- prices of sales of crude oil in a calendar month. As the principal Act applies to offshore areas producing excisable petroleum , its application has effectively been confined to the Bass Strait producing region. The second reading speech to the principal Act noted that production from areas onshore would become excisable in the event that production exceeded the 30 million barrel excise free limit, and that the price basis for excising such onshore oil production would be considered at the appropriate time.

Indications are that cumulative production from the Jackson oilfield will exceed 30 million barrels early in 1990 -91 and hence production above this limit will become excisable.

The calculation of separate Volware prices for different producing regions is necessary to prevent inequities in excise liability. These inequities arise from the fact that the realised prices of crude oil from different sources have been observed to differ and hence there are direct implications for the excise payable. In effect, those producers with lower realised prices would pay relatively more of the excise liability than those with higher realised prices if a combined Volware price were used as the basis for excise liability. This is the case for Jackson and Bass Strait production.

In order to facilitate the calculation of a Volware price to determine excise liability for the Jackson oilfield, it is necessary to widen the definition of producer in the principal Act to include onshore producers. Amendments are also required to enable the calculation of a separate Volware price for the Bass Strait and Jackson producing regions and for the description of each producing region to be prescribed in the regulations to the Act.

The amendments have been framed in a way that will enable regions additional to Jackson and Bass Strait to be listed separately in the regulations in the event that production from within other regions becomes liable for excise .

The Bill therefore provides for an effective and equitable system of collecting excise on crude oil production at Jackson. The amount of excise that will be generated from the Jackson oilfield will be dependent on the level of production. If production were to be maintained at current levels, excise of about $0.35m might be expected in a full year. Consequential changes of a minor nature are required to the Excise Tariff Act 1921. These are incorporated in the proposed amendments to the Excise Tariff Act 1921. I commend the Bill to the House, and present the explanatory memorandum.

Debate (on motion by Mr Carlton) adjourned.