Key Points:

The Northern Territory Government has released a strategy document to seek feedback on the future direction of developing the oil and gas resources industry in the NT.

On 18 November 2015, the Northern Territory Government released the draft Oil and Gas Industry Development Strategy which will be used to identify the opportunities available in the Territory for the oil and gas industry and to develop a best-practice regulatory regime. Submissions can be made on the draft Strategy until Thursday, 31 December 2015.

Commitment to a better regulatory framework

In a bid to continually improve its legislative and regulatory regime, the NT Government commissioned Dr Allan Hawke AC in 2014 to conduct an independent inquiry to assess the environmental risks and actual environmental impacts of the use of hydraulic fracturing as a method to extract oil and gas resources in the Territory and the effectiveness of mitigation measures (the Inquiry).

In February 2015, the NT Government released Dr Hawke's Report of the Inquiry into Hydraulic Fracturing in the Northern Territory. The key findings of the Inquiry were that there was no justification for a moratorium on hydraulic fracturing and environmental risks associated with this method can be managed effectively subject to the creation of a robust regulatory regime.

The Report also contained the following recommendations, all of which have been adopted by the NT Government:

  • form a Cabinet Sub-Committee, chaired by the Deputy Chief Minister and comprising the Ministers whose portfolios cover Lands, Planning and the Environment; Land Resource Management; Mines and Energy; and Primary Industry and Fisheries to oversee the work required for the NT to set the standard for a best practice regulatory regime;
  • the NT Environmental Assessment Act be restructured in the light of this Report and the proposed bilateral agreements with the Commonwealth on environmental assessments and approvals;
  • consider aligning the petroleum and mineral royalty frameworks; and
  • propose through the Council of Australian Governments (COAG) Standing Council on Energy and Resources that Australian Council of Learned Academies (ACOLA) host a workshop of international academies to consider their collective findings, learn from each other and identify the findings shared by all of the academies.

Earlier this year, the Northern Territory Economic Development Strategy was released by the NT Government, which identified Energy Resources (including oil and gas), as one of six areas for planned development. As a consequence of the resources potential of the Territory's petroleum sector and the Territory's strategic location, it is considered to be well positioned to respond to the increasing global demand for energy. The Territory is already home to two globally significant LNG plants and the NT Government has recently selected Jemena Northern Gas Pipeline Pty Ltd to construct and operate the North East Gas Interconnector (NEGI) pipeline from Tennant Creek in the Northern Territory to Mount Isa in Queensland to connect the Territory gas supplies to the eastern seaboard gas markets.

The NT Government is now moving forward in its commitment to develop the energy resources industry and to develop a best-practice regulatory regime with the release of the draft Oil and Gas Industry Development Strategy for public consultation.

This article examines the priority areas and initiatives identified in the draft Strategy which will be the focus of the NT Government's contributions to the further development and regulation of the oil and gas industry.

The draft Strategy

The NT Government has identified four priority areas where it can contribute to the further development and long-term success of the sector which we have summarised in the table below.

Priority

Government contributions

(1) Increasing awareness and access to petroleum resources
  • Lowering the costs of assessing prospectively of resources through the $23.8 million Creating Opportunities for Resource Exploration (CORE) program to make pre-competitive data and analysis available to industry and a $8 million contribution over four years dedicated to improving knowledge about the Territory's shale gas resources.
  • A "use it or lose it" policy to ensure exploration targets are available to the active explorers with inactive exploration land being relinquished and reallocated and a "no gas reservation" policy to remove a key source of risk to early stage investors.
  • Promoting the Territory's petroleum potential through trade missions, conferences and discussion papers.

(2) Creating an environment to help secure capital and providing pathways and market access for new production
  • Encouraging efficient, collaborative development of new offshore gas fields and associated onshore processing facilities to address cost pressures in the sector.
  • Working with proponents of identified major projects to promote further development and generally, assisting on land access issues.
  • Preparing for development of downstream gas processing and manufacturing by conducting a preliminary scoping study for securing petrochemicals processing investment.

(3) Balanced legislation and regulation

Legislative and regulatory reforms as identified in the Government's overall Northern Territory Economic Development Strategy announced during August 2015 and generally, reforms to legislation and processes to reflect modern practice including:

  • reviewing indigenous land tenure arrangements, including administration and use;
  • accelerating and aligning land access and approvals processes with other jurisdictions;
  • working with the Commonwealth Government to identify opportunities to reform the regulatory environment for offshore gas exploration and development;
  • developing guidelines for participants to pre-prepare to comply with regulatory requirements;
  • cutting red tape in the petroleum sector and across the economy generally; and
  • a consultation process on potential reforms to petroleum royalty arrangements.

(4) Building a competitive, local oil and gas service sector
  • Working with the Industry Capability Network Northern Territory (ICN NT) and local training organisations to develop capacity to support local petroleum sector development.
  • Developing and executing a joint business/government framework for the development of petroleum capability, including developing an Oil and Gas Industry Service and Supply Strategy.
  • Incorporate labour force projections into utilities, transport and other types of community planning.

The draft Strategy also identifies a range of initiatives to be implemented by the NT Government which are aimed at creating as much certainty as possible for early stage oil and gas investors and the community. These initiatives include:

  • Reviewing Indigenous land tenure arrangements, including administration and use. A newly formed unit within the Department of the Chief Minister is conducting this review.
  • Reforming, as necessary, the NT Government's regulatory and other practices, as well as working with other jurisdictions to align and accelerate land access and approvals processes.
  • Working with the Australian Government to identify opportunities to reform the regulatory environment for offshore gas exploration and development.
  • Developing a clear set of guidelines that can be used to ensure oil and gas sector players can pre-prepare to comply with regulatory and legislative requirements.
  • Cutting red tape for businesses, including the oil and gas sector, and across the economy more broadly, facilitated by the Red Tape Abolition Squad.
  • Undertaking a consultation process with the oil and gas industry about potential reforms to the petroleum royalty arrangements.

Further proposed reforms

The NT Government is also taking the following steps as part of its commitment to have a best-practice regulatory framework in place for the future development of the oil and gas industry:

  • a comprehensive review of the Petroleum Act is underway and public comment about proposed changes is expected to be sought in 2016;
  • new regulations to govern environmental performance are under development; and
  • reforms in relation to the environmental assessment and approvals processes are being considered.

Make a submission

The NT Government is now seeking feedback on the draft Strategy and submissions can be made by Thursday, 31 December 2015 by either lodging them online, by email or by post as detailed on the NT Government's website.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.