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Acquiring Petroleum Acreage

Overview

The state of Victoria administers petroleum onshore and in State waters (effectively within three nautical miles of the coast). Primary legislation are the Victorian Offshore Petroleum and Greenhouse Gas Storage Act 2010 for State water areas, and the Victorian Petroleum Act 1998 for onshore areas. Read more about the governing legislation.

Access to vacant petroleum acreage in Victoria is through public tender. Usual practice is to release areas at the annual Australian Petroleum Production and Exploration (APPEA) conference. In exceptional circumstances acreage may be released out of cycle.

The department recommends to the Minister areas that are likely to receive bids. Companies may also nominate, through the department, areas for release. Such nominations are kept confidential.

Victoria operates a work program system for exploration areas and bids are assessed according to assessment criteria provided with the release of the acreage.

In Victoria, coal seam gas (known as coal bed methane in the USA) is regulated under the Mineral Resources (Sustainable Development) Act 1990. Thus coal seam gas and petroleum licences can overlay each other. You can read more about acquiring mineral exploration licences for coal seam gas under the Minerals -Mineral Exploration and Mining Requirements page.

In Commonwealth waters (effectively greater than three nautical miles from the coast), the National Offshore Petroleum Titles Administrator (NOPTA) administers the legislative process for granting of exploration permits. Useful information about acreage release in Commonwealth waters can be found on the Department of Resources, Energy and Tourism (DRET) Offshore Petroleum Exploration Acreage Release website. DRET and Geoscience Australia supply the marketing effort for Commonwealth acreage.

Access to existing permits is available via farmin or purchase of existing permits. Explorers can find out about opportunities to farm-in by contacting companies with acreage.

  • Petroleum tenement lists are updated weekly on the ERD website and list tenement holders and title expiry dates
  • Current information about work programs is available on the online mapping program GeoVic. (In Geovic, display the petroleum tenements then use the “Identify” function to bring up the licence window. Choose “Work Program” from its drop-down menu)

Release of Acreage for Competitive Bid in Victoria

Petroleum acreage release is largely coordinated across all Australian States and the Commonwealth waters to take place at the annual Australian Petroleum Production and Exploration Association (APPEA) Conference which is usually held between March-June each year. Maps and technical information about areas are on display at APPEA and jurisdictions maintain exhibition booths to provide information about the acreage release.

It is recommended that companies interested in acquiring acreage in Australia attend the conference to meet with jurisdictions and with companies seeking to farmout and to hear about the state of the industry.

1. Onshore and offshore in Victorian State waters

The state of Victoria administers petroleum onshore and in State waters (effectively within three nautical miles of the coast). The administering agency is the Department of Economic Development, Jobs, Transport and Resources (DEDJTR). The Earth Resources Development Division (ERD) within the department manages advertising of areas and provision of data. The Earth Resources Regulation Division (ERR) administers the controlling legislation and assesses tenders for areas.

The department recommends to the Minister areas that are likely to receive bids. Companies may also nominate, through the department, areas for release. Such nominations are kept confidential.

In support of acreage release, the department provides:

  • Guidance notes for applicants on how to apply for acreage. This information is available for each release on the Petroleum Acreage Release page.
  • Prospectivity packages for the released areas. The department undertakes a geological review of the areas to be released and produces a report summarising the department’s view of prospectivity.
  • Data. Within Australia, data from tenements is required to be submitted and then is generally available at copy cost after a short period of confidentiality. This facilitates the assessment of prospectivity and avoids duplication of effort
  • An Online Store that contains reports on the State’s geology, prospectivity reports from previous acreage releases and an Annual Statistical Review of Victoria’s petroleum exploration and production activities.

The tender is open for three, six or twelve months depending upon the amount of acreage released around Australia and expected interest.

2. Offshore in Commonwealth waters

In Commonwealth waters (effectively greater than three nautical miles from the coast), the National Offshore Petroleum Titles Administrator (NOPTA) administers the legislative process for granting of exploration permits. Advertising of areas and useful information about acreage release in Commonwealth waters can be found on the Department of Resources, Energy and Tourism Offshore Petroleum Exploration Acreage Release website.
The site provides:

  • Information about the current areas available in Commonwealth waters
  • A description of the legislative framework for petroleum including requirements for foreign investment
  • Fact sheets including the acreage release process, bid assessment criteria and expectations of work programs
  • Links to geological data
  • A description of the area nomination process for industry

Requirements of Bids for Acreage

Bids for acreage must meet a number of requirements. Specific requirements for bids are advertised with the annual release of acreage. Typically the bidder is required to provide:

  • Technical information including geological and technical assessment of the acreage
  • Full details of the proposed Work Program
  • Evidence of financial and technical capability
  • Supplementary information to support an application

Bids must be accompanied by a completed application form and relevant application fee and be submitted by the closing date. Currently applications are required to be submitted in hard copy.

What is Work Program Bidding?

The Work Program is the agreed technical work that a company undertakes over the term of its exploration permit. Each work element is allocated to a particular year over the term. That work can be G&G studies, surveying, seismic or wells and typically builds understanding towards a well. A Work Program may also be planned to enable a decision to be made on which parts of the permit to relinquish on renewal (there is a requirement to relinquish 50% at renewal).

Work Program commitments can be varied in cases of force majeure however failure to undertake the program is grounds for cancellation of the permit. It should be noted that failure to raise funds is not regarded as force majeure. Similarly, inadequate planning to source a boat or rig on time is unlikely to be regarded as force majeure without compelling evidence of appropriate, timely planning. Cancellation of a permit will affect bidding in future rounds.

In Work Program bidding, a company puts forward the minimum work that it guarantees to undertake each permit year, regardless of the results of drilling or other work. For this reason it is sometimes also called the Minimum Dry Hole Program.

The requirement to comply with the work program is effected slightly differently between the offshore Act and the onshore Act.

  • For offshore permits the guaranteed work program is the program over the first three years, the Primary Work Program. The Secondary Work Program is the work proposed for the remainder of the term. A permittee can withdraw without penalty prior to the start of any year in the secondary period but should complete the Secondary Work Program bid for each year once that year is commenced. The Work Program is made a condition of the permit under section 75 of the Offshore Petroleum and Greenhouse Gas Storage Act 2010.
  • For onshore permits, any exploration wells to be drilled and geophysical survey activities (2D or 3D seismic, gravity, etc) will be declared by the Minister to be key objects of the Work Program under section 27 of the Petroleum Act 1998. The key objects can only be varied in extraordinary circumstances and only if the proposed variation is considered to be equal or superior work. Except in cases of force majeure, the Minister cannot renew a permit that has not achieved the key objects to the maximum extent possible.

Work in the tender that is contingent will not be considered in assessment of bids.

Minimum Acceptable Work Program Bids

The Minister may decide to not award a permit if there is not an acceptable bid.

The minimum acceptable Work Program for an area will depend on the size of the area, the amount of existing data and perceived prospectivity. Generally it would be expected that the bid would include significant seismic and/or wells.

However, the Work Program must be credible, coherent and supportable and be able to be pursued on a dry hole basis. It should be based on the technical assessment of the area and early elements of the program should be sufficient to enable later elements to proceed.

Assessment of Bids

In assessing competitive bids the following criteria will be considered. It is similar to the criteria used by the Commonwealth in its areas.

The Work Program

The Work Program bidding system aims to ensure that the exploration permit for an area is awarded to the applicant whose minimum guaranteed work program is most likely to achieve the fullest assessment of the petroleum potential within the permit area.

The number and timing of wells is a key criteria. Typically one well would be expected within the term of the exploration permit.

The Work Program should be supported by a technical assessment of the area using existing data. The Work Program should be consistent with and build on the applicants technical assessment. It should advance understanding of the area.

Ability of an applicant to undertake its proposed work program

This includes an assessment of:

  • The financial and technical ability to complete the work program.

How the exploration work program is intended to be funded.

The likelihood that the applicant will remain in a position to complete the Work Program taking into consideration the applicant’s other exploration commitments.

The technical advice available to the applicant.

  • Whether the Work Program adequately considers time required to acquire a seismic crew or drill rig and whether the timing allowed for approvals is reasonable given the status of the land in the area.
  • The proponent’s past performance in Australia and overseas.

This includes consideration of the relationship that a Director of an applicant company had with a company that defaulted over the previous term (five years for onshore areas, six years for offshore areas)

Note: Acreage will not be awarded for an area if bids are considered unsatisfactory in relation to the criteria above.

Process After the Close of Bidding

Applications are assessed against the selection criteria outlined in the invitation to tender by a panel of officers and recommendations are made to the Minister.

The assessment process typically takes around three months depending on the number of bids and their complexity.

If there is a winning bid then an offer is made to that applicant. The offer comprises the exploration permit with a work program. For onshore areas, there will also be the native title option of excising all Crown land or of undertaking a relevant Native Title Act procedure.

Onshore, if Crown land is excised then the permit can be granted immediately. If not, then the permit cannot be granted until the relevant Native Title Act procedure has been completed.

Further Information

For further information regarding the assessment process please contact:
Judy Scott
Team Leader Licensing
Department of Economic Development, Jobs, Transport and Resources
Email judy.scott@ecodev.vic.gov.au