Permit Conditions and Administration

The conditions applying to a permit granted under sections 22 (initial term) or 32 (renewal term) of the PSLA, and the continuing administration of those conditions, will be as follows:

  1. The permittee will be required to undertake within the permit boundary each component of the minimum guaranteed work program in the designated year or earlier and failure to do so may result in cancellation of the permit.

    The minimum guaranteed work program cannot be reduced once the permit has been awarded. Exploration activity in excess of the minimum guaranteed work program is permitted. Surrender of the permit in good standing may only be agreed prior to the beginning of the fourth permit year if the total three year minimum guaranteed work program is completed.

  2. No earlier than six months and no later than three months before the end of the third year of the permit term, the permittee may submit a revised secondary work program covering the remaining years of the permit term for consideration by the Joint Authority and agreement on a mutually acceptable work program.

    If agreement cannot be reached on a mutually acceptable work program, the permit may be surrendered in good standing or continue in force subject to the original secondary work program.

  3. On commencement of the fourth permit year the secondary work program (as revised, if agreed by the Joint Authority) becomes guaranteed on a year by year basis and each component must be undertaken within the permit boundary in the designated year or earlier. Failure to do so may result in cancellation of the permit.

    The permittee may renegotiate the secondary work program on an annual basis by providing substantial and compelling evidence that the work program should be varied on technical grounds prior to entry into any of the remaining years of the secondary term.

    Surrender of the permit in good standing during the secondary work program may only be agreed in a permit year if the work guaranteed for that year has been completed.

    If a permit holder fails to complete a final year work program, the permit holder will not have complied with the conditions of the permit.

  4. Permittees may at any time make application for a variation or suspension of permit conditions (e.g. work program commitments) on the grounds of force majeure. If granted a suspension has the effect of putting back the end date of the current permit year- it does not affect the ability of the permittee to undertake work activities during the suspension period. Force majeure refers to an event or effect that cannot be reasonably anticipated or controlled via experience or care. Commercial circumstances that are common risks in the industry would not normally be considered as a basis for an application on force majeure grounds. Factors such as changes in oil prices, difficulty in attracting farm-ins, avoidable delays in contracting a rig or vessel, disappointing drilling results, poor quality seismic data or the failure to prove up a prospect would not normally be considered as force majeure. Such factors may influence the perceived commercial viability of an activity, but should not prevent the explorer from adhering to its bid commitment.

    When applying for a suspension of permit conditions, permittees may also apply for an extension of the permit term. An extension has the effect of putting back the end date of each permit year remaining in the current permit term.

  5. Where a permittee has been unable to prove up a prospect to meet a drilling commitment, the permittee may apply for a variation and suspension of permit conditions to commit to sufficient new seismic surveying (additional to the current work program) to prove up a prospect to meet that drilling commitment. Only where a permittee has demonstrated a significant attempt to meet its work program commitments would a suspension be considered and then only for a maximum of 12 months.

  6. The American Petroleum Institute’s well classification is used as a general guide to determine whether a well has sufficient exploration component to meet a work program commitment.

    The first appraisal well in a permit on the extension of a discovery made in an adjacent permit will be accepted as an exploration well. Similarly, a well drilled on the unproven extension of an accumulation from an adjacent permit will be accepted as an exploration well.

  7. Permittees may seek at any time to have an alternative work activity credited as meeting a work program commitment. Whether an alternative work activity meets a work program commitment will be considered on a case-by-case basis, with the criteria for approval being to ensure that the alternative work activity is a similar, or superior, technique and meets or exceeds the objective of the original work commitment.

  8. Non-exclusive seismic data purchased by a permittee may be counted against a pre-existing work program commitment to the extent that the survey met in part, or in full, the original work program commitment and was recorded after the date on which the permit was granted/renewed.

  9. Permittees will be required to comply with the provisions of the PSLA, the Regulations and Directions issued under the PSLA, and with any special conditions associated with the permit area.

Permit Surrender

Once a permit holder applies to the relevant Designated Authority for consent to surrender the permit, the Designated Authority will consider the application in the context of the requirements of section 104 of the PSLA before giving or refusing consent to surrender the permit. The Designated Authority’s consent to surrender will be conditional on the surrender taking effect in the permit year in which the consent is given. Otherwise additional rental payments and work program commitments will be incurred.

In considering whether the permit holder has complied with the conditions to which the permit is subject and the provisions of Part III of the PSLA and of the Regulations, account will be taken of all relevant requirements, particularly:

To facilitate consideration of applications for consent to surrender, it is expected that permit holders will ensure that the permit is in good standing (i.e. has fully complied with the conditions of the permit) and that any outstanding reports and data are lodged with the application.


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Permit Cancellation

Permit holders are expected to maintain permits in good standing and ensure that all obligations under the PSLA, Directions and permit conditions, including any special conditions associated with the permit area, are met within the due time frame. Failure to undertake each component of the minimum guaranteed work program or secondary work program in the designated year or earlier may result in cancellation of the permit.

Where the Joint Authority believes cancellation of the permit is the appropriate course of action, the permit holder will be served notice of intention to cancel the permit in accordance with section 105 of the PSLA.

Generally, permit holders will be given five weeks within which to submit matters they wish to be considered and taken into account by the Joint Authority in reaching its final decision on permit cancellation.

Arrangements are available for companies that have a permit cancelled to maintain good standing (refer to ‘Arrangements to Maintain Good Standing’ below).


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Arrangements to Maintain Good Standing

A company that is in default of its work program conditions in a petroleum exploration permit but wants to maintain its good standing can have access to the following arrangements provided it satisfies government that it has made a significant attempt to assess the petroleum potential of the permit area. A significant attempt to assess the petroleum potential of the permit area would require at least the completion of seismic surveying commitments. The Joint Authority may also refer to whether the defaulting company has completed work in excess of the second highest bid for the permit area.

Where a work program condition has not been complied with, the permit is in default and would normally be cancelled. However, the permittee(s) can maintain ‘good standing’ by undertaking to spend an amount equal to the agreed monetary value of the outstanding work commitments on qualifying work in permits over re-released acreage (see below). In the case of joint ventures, the net value of the commitments will be divided on the basis of each party’s equity in the title. A company seeking to maintain its good standing must also provide to government all documentary and derivative information relating to the cancelled permit, and ensure all former titleholders agree to the data becoming immediately “open file”.

The defaulting company must agree in writing to maintain its good standing and must make a public statement about its undertaking at the time of cancellation or determination of their permit, or at such time as may be agreed with the Joint Authority. A company will be deemed to be in good standing once such an agreement is reached, until such time as it fails to progress with its undertakings. If however after entering into such an agreement, the company does not progress with its undertakings within the agreed timeframe, then it will be considered to be not in good standing and any future bids will be assessed against its default and lack of good standing.

A defaulting company seeking to maintain 'good standing' will be able to bid for re-released areas in any Adjacent Area and, if successful, will be offered a permit. Details of the re-release of acreage are provided in section 2 (Criteria for Assessment of Applications). A defaulting permittee would have to obtain permits with sufficient qualifying work to commit all the offsetting expenditures in re-released areas. Unless otherwise agreed with the Joint Authority, this would normally be expected to be in the two re-releases immediately following the cancellation of the permit.

To maintain 'good standing', a defaulting company will be required to spend its share of the full amount of the agreed value of any outstanding commitments on the acquisition and interpretation of new geophysical and geochemical data and/or drilling activities in the minimum guaranteed period (i.e. the first three years) of the new permit(s) obtained from the re-released areas. Actual expenditures on qualifying work are offset against the good standing obligation. Expenditure on the reprocessing of seismic data may be included if the original data was recorded after the date the permit was acquired.

Expenditure on permit administration, studies not otherwise referred to in this guideline and activities in permits obtained from the normal acreage releases cannot count towards a good standing commitment.

Any outstanding commitment remaining at the end of the first three years of the permit term (and this would be expected to be only a very small proportion of the total commitment) would have to be spent on studies of the offshore Australian region for the benefit of the wider petroleum exploration industry. The timeframe and nature of the studies would be determined in consultation with governments and industry.

A defaulting company that maintains 'good standing' through these arrangements will not have its past performance in the cancelled or determined permit taken into account in the consideration of future applications for vacant acreage.

The Joint Authority and the defaulting companies will agree on the monetary value of the outstanding work commitments. Independent expert advice will be sought where there is dispute about the agreed value. The defaulting permittees will be liable for the cost of obtaining such advice. Companies may be required to provide audited accounts demonstrating that the required expenditure commitments have been met.


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