p r o d u c e d w i t h t h e a s s i s t a n c e o f

20

16

World supply of oil and LNG

World oil supply averaged 88.7 million barrels a day in 2014, an increase of 2.1 million barrels a day (2.3%) from 2013.

Share of world oil supply 2014

OPEC 41.0%

USA 12.3% Other North America 8.2%

SOURCE: BP STATISTICAL REVIEW OF WORLD ENERGY 2015

Russian Federation 12.7%

Europe 7.1%

China 5.0% Asia–Paci�c 4.4%

Middle East & Africa (non-OPEC) 0.0%

South & Central America 9.3%

Top 10 LNG exporting countries 2014 (billion cubic metres)

0 20 40 60 80 100 120

SOURCE: BP STATISTICAL REVIEW OF WORLD ENERGY 2015

Qatar

Malaysia

Australia

Nigeria

Indonesia

Trinidad & Tobago

Algeria

Russian Federation

Oman

Yemen

2

Energy use in Australia

Oil remained Australia’s largest primary energy source in 2013–14, followed by coal (32%) and natural gas (24%). Renewables accounted for 6 per cent of Australia’s energy mix in 2013–14.

Share of primary energy consumption 2013–14

Oil 38% Coal 32%

Renewables 6%

SOURCE: ENERGY IN AUSTRALIA 2015

Gas 24%

The global energy market continues to adjust to the additional supplies coming on line over recent years, coupled with less robust global demand growth. Global supply has increased at a greater pace than global demand, causing a commodity price correction — a fall in the price of oil.The price of oil (US$ per barrel)

0

30

60

90

120

150

1999WTI spot price FOB

2002 20062004 2008 2010 2012 2014 2016

SOURCE: US ENERGY INFORMATION ADMINISTRATION

Brent spot price FOB

3

Production—petroleum liquids

Australia’s production of oil, condensate and LPG has been trending down since it peaked in 2000. Australian petroleum liquids production (millions of barrels)

SOURCE: APPEA (UNTIL 2013), ENERGYQUEST (2014 ONWARDS)

1999 2001 2003 2005 2007 2009 2011 2013 20150

50

100

150

200

250

300

Crude LPGCondensate

Production of petroleum liquids by state/territory (millions of barrels)

Crude Condensate LPG2014 2015 2014 2015 2014 2015

NSW – – – – – –NT 1.8 1.5 – – – –Qld – – – – – –SA 13.6 12.1 1.7 1.5 2.5 2.2Tas – – 0.5 0.5 0.5 0.5Vic 11.5 5.8 8.4 7.1 13.1 9.4WA 56.6 56.6 34.0 31.7 7.3 5.9Total 83.6 76.0 44.6 40.8 23.4 18.0

SOURCE: ENERGYQUEST | Note: includes production from Commonwealth Waters adjacent to each state or territory and excludes production from the JPDA.

4

Production—gas

Australia’s total production of natural gas has more than doubled since 1998. This increase in production has met both domestic and international market needs.Total domestic natural gas production and LNG exports (mmcf)

SOURCE: APPEA (UNTIL 2013), ENERGYQUEST (2014 ONWARDS)

LNG Total domestic gas1999 2001 2003 2005 2007 2009 2011 2013 2015

0

1000500

20001500

2500

Australia has significant quantities of discovered gas resources, much of which remain undeveloped. Opportunities exist to develop new gas projects, including for residential and commercial use, domestic gas processing industries and export sales.

Production of natural gas by state/territory (mmcf)

Conventional gas Natural gas from coal seams

LNG exports

2014 2015 2014 2015 2014 2015NSW – – 4.5 5.8 – –NT 0.9 1.7 – – – –Qld 3.2 2.2 294.9 596.1 – 315.8SA 94.2 94.1 – – – –Tas 13.0 14.1 – – – –Vic 319.8 316.7 – – – –WA 1462.9 1438.8 – – 1101.5 1065.2Total 1894.1 1867.6 299.5 601.8 1101.5 1381.0

SOURCE: ENERGYQUEST | Note: includes production from Commonwealth Waters adjacent to each state or territory and excludes production from the JPDA.

5

Petroleum exploration

The long-term growth in the Australian oil and gas industry depends on the level of exploration.

Oil and gas cannot be produced without first locating new resources and these cannot be discovered without drilling wells. Key variables that drive exploration decisions include: available and prospective acreage, capital availability, the costs of exploring, and the ability to commercialise discovered resources.

The current depressed crude oil price is affecting exploration activity, but it is not the only factor. Falling revenue means companies are cutting their exploration expenditure and fewer exploration wells are being drilled in Australia.

Annual exploration well activity and West Texas intermediate oil price

$0

$70

$140

SOURCE: US ENERGY INFORMATION ADMINISTRATION, APPEA

0

50

100

150

200

250

Offshore explorationwells (incl. appraisal)

Onshore explorationwells (incl. appraisal)

WTI spot price FOB

2005 2006 2007 2008 2009 2010 2011 2012 2013 20152014

6

Australia imports and exports significant quantities of petroleum and petroleum-related products. Australia had a surplus in the trade of oil and gas until 2003–04, but has been a net importer since then. This may change in coming years, with the increase in LNG and condensate exports offsetting reduction in the domestic oil production (and the associated increased imports of oil).

Trade in oil, gas and petroleum products ($ billion)

Economic significance of the industry — trade

Oil and gas imports and exports 2014–15 ($ billion)

Exports ImportsCrude 8.7 15.0LNG 16.9 –LPG 0.8 –Products 0.5 19.3Bunkers – –Total 26.9 34.3

SOURCE: DEPARTMENT OF INDUSTRY, INNOVATION AND SCIENCE 2016

SOURCE: DEPARTMENT OF INDUSTRY,INNOVATION AND SCIENCE 2016

1999

–00

2001

–02

2003

–04

2005

–06

2007

–08

2009

–10

2011

–12

2013

–14

2014

–15

2000

–01

2002

–03

2004

–05

2006

–07

2008

–09

2010

–11

2012

–13

ImportsLNG exportsExports (excl. LNG)

0

15

30

45

7

Economic significance of the industry — taxation

The fiscal framework is a key factor shaping investment decisions in the oil and gas industry. Producers are confronted with an array of taxes, charges and fees covering petroleum activities. Fiscal imposts include resource taxes (including the petroleum resource rent tax, petroleum royalties and production excise), company income tax and a wide variety of other taxes, fees and charges. Data compiled by APPEA indicates that on average, taxes account for around half of the industry’s overall level of pre-tax profit.

Estimated petroleum industry profit (before tax) and taxation payments ($ billion)

SOURCE: APPEA FINANCIAL SURVEY

Tax as a percentage of pre-tax pro�t

Taxes and charges

Pro�t plus taxes and charges

0

10

5

15

20

60%

80%

40%

20%

0%

1999

–00

2001

–02

2003

–04

2005

–06

2007

–08

2009

–10

2011

–12

2000

–01

2002

–03

2004

–05

2006

–07

2008

–09

2010

–11

2012

–13

2013

–14

Total payments to governments have averaged around $8 billion per year over the last five years. Total payments are expected to increase in the coming years as projects currently under construction start production, although lower prices may affect payments in the near-term.

8

Industry investment

The oil and gas industry has traditionally invested amounts that are greater than its level of profits. Since 1999–2000, based on value of total assets, the industry’s capital investment spending is nearly double its cumulative profits over the same period.

Industry cumulative profits and investments ($ billion)

SOURCE: APPEA FINANCIAL SURVEYTotal industry assets

Cummulative net industry pro�t

0

10050

200250

150

300350

1999

–00

2001

–02

2003

–04

2005

–06

2007

–08

2009

–10

2011

–12

2000

–01

2002

–03

2004

–05

2006

–07

2008

–09

2010

–11

2012

–13

2013

–14

The number of projects in the publicly announced and feasibility stages rose during 2015.

LNG, gas, oil major project investment pipeline, October 2015

2014 2015 Change

No. of projects

Range A$ billion

No. of projects

Range A$ billion

Publicly announced 7 1–5+ 3 1.5–5+ -4Feasibility stage 7 30 13 0.5–10 +6Committed 13 197 11 195 -2Completed 1 0.4 2 23.5 +1

SOURCE: DEPARTMENT OF INDUSTRY, INNOVATION AND SCIENCE 2016

9

There has been a significant improvement over the last decade in the Australian oil and gas industry’s rates of injuries and safety performance. In that time, the industry has experienced rapid growth and has introduced new operations.

Total recordable injury frequency rate (per million hours worked)

SOURCE: APPEA

0

8

2

4

6

10

20022000 2004 2006 2008 2010 2012 2014

Lost time injury frequency rate (per million hours worked)

0

2.0

2.5

1.0

0.5

1.5

3.0

SOURCE: APPEA

20022000 2004 2006 2008 2010 2012 2014

Safety information10

Resources

Selected international proven gas reserves and rank 2014 (tcf)

0 250 500 750 1000 1250Australia (10)

United Arab Emirates (7)Venezuela (8)Algeria (9)

Saudi Arabia (6)United States (5)Turkmenistan (4)Qatar (3)

Iran (1)Russian Federation (2)

SOURCE: BP STATISTICAL REVIEW 2015

Australia’s estimated petroleum resources

Crud

e oi

l

Cond

ensa

te

LPG

Conv

entio

nal g

as

Coal

seam

gas

Shal

e ga

s

Tight

gas

Tota

l gas

mmbbl mmbbl mmbbl tcf tcf tcf tcf tcfEDR 966 2110 964 103 33 – – 136SDR 298 622 377 54 60 2 – 116Inferred – – – ~10 111 – 20 141All identified resources 1264 2733 1342 167 203 2 20 392

Potential in- ground resource ~~ ~~ ~~ ~~ 235 396 ~~ 631

Resources: identified, potential and undiscovered

1264 2733 1342 167 235 396 20 819

SOURCE: GEOSCIENCE AUSTRALIA 2014

11

a p p e a w o u l d l i k e t o a c k n o w l e d g e t h e k i n d s u p p o r t o f e n e r g y q u e s t i n t h e p r e p a r a t i o n o f t h i s r e p o r t .

www.appea.com.auHead OfficeLevel 10 60 Marcus Clarke St Canberra ACT 2601T +61 2 6247 0960appea@appea.com.au

Adelaide 19 Vardon Ave Adelaide SA 5000T +61 8 8943 0675adelaide@appea.com.au

PerthLevel 4 190 St George’s Tce Perth WA 6000T +61 8 9426 7200perth@appea.com.au

Glossary of termsEDR economic demonstrated resourcesJPDA Joint Petroleum Development Area zone in the Timor Sea from which

Australia receives 10%, and Timor Leste 90%, of petroleum revenueLNG liquefied natural gasLPG liquid petroleum gasmmcf million cubic feetmmbbl million barrelsPJ petajoulesSDR sub-economic demonstrated resourcesSpudded the process of commencing a well drilling process removing

rock, dirt and other sedimentary material with the drill bittcf trillion cubic feet

BrisbaneLevel 36 32 Turbot St Brisbane QLD 4000T +61 7 3231 0500brisbane@appea.com.au

EnergyQuest Level 30, 91 King William St, Adelaide SA 5000 T +61 8 8431 7903 www.energyquest.com.au

DarwinSuite 16, First Floor 48–50 Smith St Darwin NT 0800T +61 433 917 317darwin@appea.com.au