David Byers of APPEA is concerned by a new offshore bidding plan.

David Byers of APPEA is concerned by a new offshore bidding plan. Photo: David Mariuz

Australia will introduce cash bidding for the awarding of offshore exploration licences in “mature areas,” a move that has drawn opposition from the oil industry's main lobby group.

“This will only apply to mature areas or those known to contain petroleum accumulations,” said Federal Resources Minister Martin Ferguson, after revealing the plan at a Committee for Economic Development lunch.

The move “will prevent over-exploration in areas where none or little may be required and, in doing so, ensure the lease of these areas is equitable, economic and efficient”.

But the Australian Petroleum Production & Exploration Association (APPEA) criticised the plan, saying it would add to costs and was likely to squeeze out smaller players in the industry.

“The introduction of cash bidding has the potential to impact on Australia's small explorers who may have limited funds available for exploration,” APPEA chief executive David Byers said. “Many of these companies have been directly responsible for identifying the resource potential of regions and basins that are now producing oil and gas in Australia.”

Mr Ferguson said the government would consult with industry before finalising the cash bidding process. The move was intended to prod companies to bring production opportunities to the market rather than sit on the resource.

“In these mature areas, if they are prepared to pay real money because they think it's commercial, then logically . . . they'll be wanting to get a return on that investment,” he said.

“We might have a floor price below which, if we don't get what we think is appropriate for the opportunities, you just don't award an outcome.”

APPEA said the existing method in granting exploration licences by assessing proposed work programs and the likelihood of success had served Australia well.

“Cash bid payments reduce the overall pool of funds available for companies to undertake exploration, because they divert funds from the drilling of wells to the payment of government access charges,” Mr Byers said.

Geoscience boost

Separately, Mr Ferguson announced the government had reversed course and would increase rather than cut funding for Geoscience Australia, the federal body charged with mapping the country's resources.

Geoscience will now receive an extra $114 million over four years to identify more of the mineral wealth.

“In many ways, we've hardly scratched the surface,” Mr Ferguson said.

Geoscience will receive $34 million in 2013-14 and $40 million for the following three years, the minister said.

The extra funding will come as a relief to Geoscience staff. Prior to Wednesday's announcement, the funding had been budgeted to fall from $113.8 million in the current fiscal year to $98.8 million in 2013-14 and $88.4 million the following year.

The funding included $26 million a year to Geoscience for its pre-competitive data program to improve the knowledge of the resource base and open up opportunities for new resource projects, Mr Ferguson said.

“It's about doing the work that will keep the pipeline [of projects] going for decades in the future,” he said.

The extra funds will also help contribute to the regular release of more acreage for exploration.

The additional money also includes $5 million in 2013-14, increasing to $8 million in the subsequent three years, to enhance Geoscience's groundwater modelling capabilities to assess better the long-term health of the Murray-Darling Basin and other regions, the ministry said.

An extra $3 million rising to $6 million in 2014-15 will go to boost the body's disaster planning and response program, the Australian Tsunami Warning System, and to further understand Australia's clean energy potential.