Selling Australia's Crude Oil Production

In 1984/85 financial year Australia produced 529 thousand barrels per day (kbd) of crude oil. By far the major contribution (453 kbd) was light waxy oil from offshore Gippsland, Victoria. When these discoveries were made in the latter 1960s, imported oil was available in abundant supply and at low prices. Because of this, the Gippsland producers persuaded Government to control the marketing and pricing of their crude, and thus provide the required security of offtake. Political events in the middle East created supply shortages during the 1970s, and dragged up government selling prices for OPEC crude oil. Thus Arab Light crude that sold for less than US$2/barrel (bl) in 1970 reached $34/bl in 1981. Following the consequent decline in world oil demand, in 1982, Australian refiners sought to evade their obligation to lift Gippsland crude. Hence, in 1983, the Government was forced to introduce a floor quota of 385 kbd of Gippsland crude liftings and to allow producers to export any additional production refiners did not require. On expiry of the old arrangements, Government introduced a partial free market from January 1985, whereby the balance in excess of 350 kbd may be sold to Australian refiners at negotiated prices, or exported as before. In 1984/85 exports were some 90 kbd and will be higher in the current year. About half this total has been exported by BHP, providing valuable experience and lessons which are described in the paper.