Internet stocks pose risk for Australia's upstream sector

Australia�s petroleum industry has warned that the investment community�s 'love affair' with high-risk internet stocks could cause a plunge in exploration and production expenditures that might ultimately lead to declining domestic oil production, supply disruptions, worsening national accounts, and a compromised position on greenhouse gas emissions.


BRISBANE�Australia�s petroleum industry has warned that the investment community�s "love affair" with high-risk internet stocks could cause a plunge in exploration and production expenditures that might ultimately lead to declines in domestic oil production, disruptions to supplies, worsening of national accounts, and a compromised position on greenhouse gas emissions.

Speaking on the eve of the 40th annual Australian Petroleum Production & Exploration Conference (APPEA) in Brisbane, the association chairman, John Crum�who is also managing director of Apache Energy Pty. Ltd., Perth�added that the industry is also being put at risk by the Australian government's inaction over a number of legislative problems that are driving exploration dollars overseas.

Crum said the lack of interest in the oil sector from investors means that the value of assets in the industry has decoupled from the oil price. This underlines a great irony, he says: While investor interest has fallen off, local oil companies have never had it better, in terms of commodity prices and profit levels.

APPEA says the focus of fund managers on maximizing short-term rates of return has had a detrimental effect on the attractiveness of the oil and gas industry as a place to invest. This undermines shareholders� returns, compromises the attractiveness of farmin projects, and leads to a drying up of risk capital.

On government inaction, Crum said that the industry does not know the rules that now apply to oil exploration. The native title impasse in the Senate has to be resolved within weeks, not months, he said. He added there has been a lack of guidelines provided to the oil and gas industry over new legislative moves in environmental conservation and corporate tax regimes.

The root of the problem, he said, is that the federal and state governments continue to treat energy policy as a subset of other industry policy. All these things add to the risk of doing business in Australia at a time when there is strong competition for exploration dollars in other countries.

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