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. However, if 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 Offshore 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.