Commonwealth Numbered Regulations - Explanatory Statements

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PETROLEUM EXCISE (PRICES) REGULATIONS (AMENDMENT) 1996 NO. 84

STATUTORY RULES 1996 No. 84

Issued by the Authority of the Minister for Resources and Energy

Petroleum Excise (Prices) Act 1987

Petroleum Excise (Prices) Regulations (Amendment)

Section 14 of the Petroleum Excise (Prices) Act 1987 (the Act) provides that the Governor-General may make regulations for the purposes of the Act.

The purpose of the Act is to determine on a monthly basis, for each excisable oil producing region, a volume weighted average, realised (that is, a VOLWARE) price for stabilised crude petroleum oil, which is used as the basis for determining excise payable under the Excise Tariff Act 1921.

The Act was initially confined to the Bass Strait oil producing region as this was the only offshore region producing excisable petroleum. The Act was subsequently amended to widen its application so that a VOLWARE price could be determined for both offshore and onshore regions producing excisable petroleum. On 21 December 1990, the Petroleum Excise (Prices) Amendment Act 1990, (the Amendment Act) which put this change into effect, received Royal Assent. Subsequent changes to the Regulations allow oil producing regions to be added to the Schedule with individual commencement dates.

The Amendment Act defined oil producing region, to mean one or more production areas within the meaning of the Excise Tariff Act 1921 from which stabilised crude petroleum oil is obtained, being the area or the areas that are together prescribed by the Regulations as an oil producing region. The Amendment Act also defined 'VOLWARE commencement date' in relation to excisable crude petroleum oil obtained from an oil producing region as the date after which final VOLWARE prices and interim VOLWARE prices for each month are calculated in relation to that oil, not being a date earlier than 31 December 1987.

The calculation of separate VOLWARE prices for different producing regions is necessary to prevent inequities in excise collection. These inequities arise from the fact that the realised prices of crude oil from different regions 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 excise than those with higher realised prices if a combined VOLWARE price were used as the basis for determining excise liability.

It has; become apparent that production from the North West Shelf oil producing region will most likely approach the 4767.3 megalitres (30 million barrels) excise exempt limit prescribed in the Excise Tariff Act 1921 during the second half of 1996. As a result the Regulations required amendment to include the North West Shelf oil producing region in the Schedule to the Regulations so that a separate VOLWARE price can be determined for the region.

It has been estimated that the Roller/Skate accumulations, located 'onshore' (that is, inside the outer limits of the territorial sea of Australia) in coastal waters off Western Australia, will achieve a cumulative production of 30 million barrels within the next 2-3 years. Oil from Roller/Skate will be mixed with other crude oils (eg from the Saladin development, which is currently excisable) in storage facilities on Thevenard Island, and sold as a single commingled product. For administrative efficiency it is proposed to combine the Saladin and the Roller/Skate production areas to form the Thevenard Island oil producing region allowing a single VOLWARE price to be calculated for these two production areas. In a similar manner the Harriet/Lenita production area, which is currently excisable, is to be part of the Varanus Island oil producing region which would allow potentially excisable production areas linked to Varanus Island to be included in the same VOLWARE price calculation. The Jackson oil producing region consisting of the Jackson production area is unchanged.

The amendment to the Regulations inserts: the North West Shelf oil producing region, consisting of the Wanaea and Cossack production areas; the Thevenard Island oil producing region, consisting of the Saladin and Roller/Skate production areas; and the Varanus Island oil producing region consisting of the Harriet/Lenita production area in the Schedule.

As the actual date on which cumulative production from Wanaea, Cossack and Roller/Skate will exceed the excise exempt limit is not known precisely, and there remains the possibility of further production areas being added to the Varanus Island oil producing region, the date of commencement for these regions is the date on which the oil producing areas within them exceed the excise exempt threshold of 4767.3 megalitres (30 million barrels).