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House of Representatives

Offshore Petroleum Amendment (Greater Sunrise) Bill 2007

Offshore Petroleum Amendment (Greater Sunrise) Act 2007

Explanatory Memorandum

General Outline

This Bill puts in place the framework necessary for Australia to meet its obligations arising under the Agreement between Australia and the Democratic Republic of Timor-Leste relating to the unitisation of the Greater Sunrise petroleum resource, when the Offshore Petroleum Act 2006 comes into force. The Agreement, known as the Greater Sunrise unitisation agreement, was signed by Australia and Timor-Leste in Dili on 6 March 2003.

Where a petroleum resource, whether comprised of one or more pools, straddles borders, production rights or boundaries between administrative systems, sound resource management often requires the resource to be developed as a single unit. This is known as the unitisation of a petroleum resource. In the absence of unitisation, production from one part of a resource could be to the detriment of the resource as a whole or to those with an interest in the resource on the other side of the boundary.

In 2003, Australia and Timor-Leste agreed to the arrangements to govern the unitisation of the Greater Sunrise petroleum resource. This resource straddles the border of the Joint Petroleum Development Area, which is the area of shared jurisdiction between Australia and Timor-Leste established by the Timor Sea Treaty, and an area of sole Australian jurisdiction located within the Northern Territory offshore area.

The Greater Sunrise unitisation agreement will be ratified by Australia and Timor-Leste once both countries have put in place the required domestic arrangements to enable them to fulfil their obligations under the Agreement. This Bill and the Customs Tariff Amendment (Greater Sunrise) Bill 2007 do this for Australia.

Two general principles underlie the framework of this Bill.

First, Australia and Timor-Leste have agreed, in effect, that development of the Greater Sunrise resource should, to the extent necessary, be subject to consistent administrative requirements. As a result, there will be a consistent legislative regime for petroleum operations throughout the unit area in relation to safety, occupational health and environmental protection. Annex II of the Greater Sunrise unitisation agreement specifies the Australian legislation that is to apply throughout the unit area.

Second, Australia and Timor-Leste have agreed, in effect, that the essential elements of the petroleum licensing regime on each side of the boundary will be maintained. Quite different regimes are in place in the Joint Petroleum Development Area and the area of sole Australian jurisdiction. In the former, a contractual licensing regime is in place, while, in the latter, a legislated licensing regime is in place. As neither system is to prevail in relation to essential licensing issues, persons conducting petroleum activities in the unit area will have to meet the requirements of both regimes. Those persons will need to hold rights, deriving from contract, to undertake activities in the part of the unit area which is within the Joint Petroleum Development Area (labelled, in this Bill, as the Western Greater Sunrise area) and to hold licensed rights, deriving from a legislated regime, to undertake activities in the part of the unit area within sole Australian jurisdiction (labelled, in this Bill, as the Eastern Greater Sunrise area).

Such a parallel system can work only if the administrators of the two regimes act in concert. The Greater Sunrise unitisation agreement provides for this to occur through consultation and information sharing.

Petroleum activity in the Eastern Greater Sunrise area is currently administered by the Australian and Northern Territory Governments. Petroleum activity in the Western Greater Sunrise area is administered by the Timor Sea Treaty Designated Authority which operates with the oversight of the Timor Sea Joint Commission. The Joint Commission, in turn, reports to the Ministerial Council established by the Timor Sea Treaty.

For Australia, to ensure that administrative arrangements for the Eastern Greater Sunrise area will be in concert with arrangements for the Western Greater Sunrise area, some modifications are required to the framework applying to petroleum administration in the Eastern Greater Sunrise area. This area forms a small part of the Northern Territory offshore area. When this Bill comes into force, petroleum operations in this area will be administered under the Offshore Petroleum Act 2006 . The administration is effected through a Joint Authority (composed of the responsible Commonwealth Minister and a counterpart Northern Territory Minister) and a Designated Authority (composed of the counterpart Northern Territory Minister). As the Commonwealth Minister is the Australian member of the Timor Sea Ministerial Council which has ultimate oversight for operations in the Joint Petroleum Development Area, including the Western Greater Sunrise area, this Bill provides that the responsible Commonwealth Minister, alone, will discharge the duties of the Joint Authority and the Designated Authority in the Eastern Greater Sunrise area. As a related measure, the Bill makes provision for administrative arrangements in relation to an offshore area to be capable of being applied to a part of an offshore area.

Financial Impact Statement

The development of the Greater Sunrise petroleum resource is expected to yield Australia around $10 billion in upstream revenue over the life of the project.


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