Oil and gas exploration on private land

What is petroleum?

Petroleum, as defined by the Petroleum Act 1998 (the Act), is:

• any naturally occurring hydrocarbon
• a mixture of hydrocarbons that may occur in a liquid, solid or gaseous state
• a mixture of non-hydrocarbon gas such as carbon dioxide, hydrogen sulphide, nitrogen or helium.

Crude oil and natural gas are the most common commercially exploited petroleum (hydrocarbon) products.

Origins

Petroleum originates from the organic remains of plants and animals that are millions of years old. Trapped in fine-grained sediments, the plant and animal remains are buried and cooked by heat at depth in the earth to produce oil and gas. The oil and gas migrates through porous rocks until trapped by non-porous rocks.

Companies first explore the sub-surface to understand and map the geology to identify places where oil and gas might be trapped. The company will then drill an exploration well to test the trap.

Gravity and magnetic surveys

Gravity and magnetic surveys can be carried out from the air or on land. Gravity surveying is typically done on the ground with a hand carried device that measures the earth’s gravity field. Magnetic surveys are most commonly acquired by a low flying aeroplane fitted with a device to measure the earth's magnetic field. These surveys give a rough idea of the structure of the rocks at depth.

Geochemical surveys

The geochemical survey detects the presence of hydrocarbons, either with a probe stuck in the ground or by burying an absorbent material. The sample is then analysed. There are also airborne methods using a low-flying aircraft to detect gas 'halos' released from sub-surface rock structures. Such surveys indicate that hydrocarbons have been generated but do not give a good idea of where a trap is.

Seismic surveys

Seismic surveying is the key petroleum exploration tool to determine a drill location. Seismic or sound waves are produced and travel down through the earth, reflecting off rock layers back to the surface and allowing an interpretation of the structure and the identification of traps. The most common method of seismic surveying is Vibroseis in which waves are generated by shaking the ground via a hydraulically controlled plate mounted beneath a truck or trucks.

The vibrations bounce off sedimentary rock layers and the reflections are then recorded by receivers (called geophones) attached to a long cable laid out on the surface. Seismic data can be acquired in single lines, generally more than one kilometre apart and is called 2D (for 2 dimensional). It can also be acquired with a very close spacing where cables are laid out only about 25-30 metres apart. Because this close spacing produces a very detailed view, it is called 3D (3 dimensional). Seismic data may be acquired along roads or across fields without any clearing required. The trucks can also "skip" fences, dams, windbreaks, etc and it may be possible to wind around mature trees rather than record in a straight line.

Drilling

The size of a drill rig will depend upon how deep it is intended to drill. A shallow hole of 500 metres may use a truck-mounted rig, similar to those used for drilling for water bores but fitted with safety equipment in case gas is encountered. However, more common is a rig used to drill a 2000-3000 metre hole that would temporarily take up an operational site of about 1 hectare. Additionally, access to the site would be required. A rig would typically be on site for 2-4 weeks for the drilling of a 2000-3000 metre borehole unless testing is required which normally takes an additional 1-2 weeks.

When completed, an unsuccessful well is plugged with cement and casing and cut off below ground level. A commercially successful well will probably result in production. In that case, a ‘Christmas Tree’ (a number of valves for controlling the well) is installed and a buried pipeline laid to take gas to a gas plant. The Christmas Tree is fenced off and occupies a small area of land.

Petroleum exploration is the act of searching petroleum using various methods. It most often involves seismic surveying and drilling of wells. An exploration permit is required to explore for petroleum.

Petroleum production is the extraction of discovered petroleum from the ground. It includes underground gas storage, (which is the injection and recovery of gas, usually in a depleted, existing gas field) and the building of pipelines and can include a processing plant on the licence area. A production licence is required for these activities.

Does exploration always lead to production?

Exploration does not often lead to production. If a petroleum deposit is found, it has to be economically viable for production. This will depend on a variety of factors such as size of the find, quality of the petroleum and its reservoir, access to the deposit, distance from facilities and the ability to find a buyer for the product. For example, there is probably a small oil accumulation at Lindon (tested by Lindon-1 and Lindon-2 wells) near Heywood, north of Portland. Production testing at the Lindon-2 well recovered a small quantity of heavy oil. However, because of the low oil quality, poor reservoir and small volumes, it was deemed uneconomical to develop.

A long term success rate of around 1 discovery for every 10-exploration wells drilled across a whole basin is typical for a moderately successful basin. In a given area, exploration may be more successful. For example, near Port Campbell is an area where success ratios are better than 1 in 3. On the other hand, in the onshore Gippsland Basin, there have been no commercial discoveries to date.

A map showing the principal sedimentary basins in Victoria is available via Earth resources publications.

The Crown (the State) owns all oil and gas (petroleum) on or below the surface of any land in Victoria, except for petroleum injected such as in underground gas storage.

A person extracting any naturally occurring petroleum in accordance with Petroleum Act 1998 (the Act), becomes the owner of that petroleum.

A person can only carry out any petroleum exploration or production operation in Victoria if they have an authority under the Petroleum Act 1998.

Legislation

The principal Act and regulations that are relevant to petroleum operations on private land are:

• Petroleum Act 1998
• Petroleum Regulations 2021

Can I explore for or extract petroleum on my land?

Only a person granted an exploration permit can explore for petroleum in an area in accordance to the Act. The process of awarding exploration permits is described below. Similarly, a production licence is required before petroleum can be extracted. The process for getting a production licence is also described below. Ownership of land does not give any rights to explore for or extract petroleum on that land.

Can I get royalties from production on my land?

Royalties arising from the production of petroleum are paid to the State. The landowner does not have any legislative right to be compensated for petroleum extracted from the land. As there are defined requirements for compensation in the Act, royalty has not normally been paid to landowners.

Can I get access to gas discovered on my land?

Raw gas coming out from a well has to be treated or processed to remove any impurities such as water, carbon dioxide, and other non-petroleum gases for industrial and domestic use. Treated gas is then piped at high pressure to markets. The cost of installing a valve to reduce pressure to a level where it could be used domestically is prohibitive. Thus, direct access to gas discovered on your land is not likely.

An exploration permit authorises the company to carry out petroleum exploration and do anything necessary for this purpose.

Vacant area is advertised usually in March or April at the time of the annual Australian Petroleum Production and Exploration Association (APPEA) conference, inviting tender applications for exploration permits from companies that wish to explore for petroleum.

Bids are evaluated based on offers to perform specified exploration programs. The exploration programs identify the amount of work to be done and the year in which it will be done but it does not specify a particular location. The location will be determined following studies by the successful bidder. The results of the exploration program in one year will influence the location of the following year's program.

An exploration permit is granted over a maximum area of 12,500 square kilometres and for a period of five years. The permit can be renewed once for another five years with a reduction in area of at least 50 per cent.

Areas released for bid and exploration programs of successful bidders can be viewed on the this web site. Most of the sedimentary areas in the Otway and Gippsland Basins are currently subject to petroleum exploration permits.

Retention lease

The holder of an exploration permit can apply for a retention lease after making a petroleum discovery that is considered uneconomic at the time but likely to be economic within 15 years. A retention lease can be granted for a term of up to 15 years and cannot be renewed.

There is currently one retention lease in the onshore area of the Otway Basin in western Victoria.

Production licence

The holder of an exploration permit or a retention lease can apply for a production licence within the permit or lease area. A production licence will be no bigger than is necessary to cover the oil or gas field and to enable production. A production licence continues in force for the life of the field or until surrendered or cancelled.

A production licence authorises the company to produce and explore for petroleum from the licensed area, and to carry out activities that are necessary for this purpose.

All current onshore production licences are located near Port Campbell.

Special access authority

A special access authority gives the company the right to carry out some petroleum exploration, as specified in the authorisation, but not drilling a well, and does not give rights to petroleum in the area. A special access authority is granted for a period up to one year and can be extended for a further year.

Vacant areas

Landholders are not notified of vacant areas offered. All of the Otway and Gippsland Basin areas have been subject to exploration permits. Vacant area is advertised usually in March or April and can be viewed on the department's web site.

Award of title

We maintain a petroleum register, which is a registration record of approvals, agreements, transfers, surrender and cancellation of titles.

On the payment of a fee, a person may inspect the petroleum register and any documents that form part of the register at any time during office hours and/or obtain a copy of any entry or document in the petroleum register. The register may be inspected at:

Earth Resources Information Centre
Level 15, 1 Spring Street,
Melbourne VIC 3000

Alternatively, maps of petroleum titles and lists of titles are available from Earth Resources Regulation or can be downloaded from this website.

Objections

There is no provision for objecting to the grant of a title. The reason for this is that the grant of a title does not give the company the absolute right to undertake works. Further consents are required before activity can be undertaken on a particular piece of land. A person can not carry out any petroleum operation on any land unless a written notice outlining the proposed operation is given, to the owner, occupier or person managing the land, at least 21 days before the activity starts.

Environment effects

Before any operation, government approvals must be obtained. Controls are placed on all aspects of exploration and production to ensure that adequate and effective monitoring and protection of the environment takes place. The department also ensures that before the company starts any petroleum activities that it has lodged a bond for rehabilitation.

Prevention of oil spills and gas blowouts

There have been no raw oil or gas spills or blowouts from exploration or production operations onshore in Victoria. Some wells dating from prior to the Second World War on the Lakes Entrance oil field were inadequately abandoned and allowed small quantities of oil to seep to the surface. The department went through a program of identifying and properly plugging these wells.

Operations can only be undertaken after the approval of an operation plan that addresses the environment and safety. An exploration well can blow out if unexpected high pressures are encountered. The risks are investigated by looking at pressures encountered in nearby wells. While drilling, flow into the well from reservoirs is controlled by mud whose density can be varied, depending on the pressure. Wells have manual and automatic safety valves at the top of the well to control the well. Drill sites are laid out so that any spill would be captured on site.

Planning permits

Exploration operations do not require a planning permit. Production operations require a planning permit except if the proposed project has been approved by the Minister following the preparation and assessment of an Environment Effects Statement under the Environment Effects Act 1978.

However, both exploration and production operations may be the subject of conditions arising from consideration under the Petroleum Act.

Consent for works on private land

Section 147 of the Act summarises the consents required to access various types of land. For private land, the consent of the Minister is required and the following is provided to the department:

• an operation plan that is acceptable to the Minister, identifying safety and environmental risks, specifying what will be done to eliminate or minimise the risks, and how the land will be rehabilitated.
• evidence of insurance and the rehabilitation bond.
• twenty-one days (or any shorter period agreed) written notice must be provided to the landowner.

Before any petroleum operation can commence there must be:

• consent from the landholder or occupier, or
• a compensation agreement with the landowner or occupier, or
• the Victorian Civil and Administrative Tribunal has determined the amount of compensation payable to the owners or occupiers of the land.

Exploration on land is a right of the exploration permit holder (subject to approvals and conditions). If you do not reach agreement with the company, the company will be allowed to proceed following determination of compensation by the Tribunal. The company must give you 21 days notice before commencing activities (unless you agree to a shorter period).

The company must also provide to the Minister, an approved operation plan, evidence of adequate insurance covering all liabilities in relation to petroleum operations, and a rehabilitation bond.

Depending on the nature of your farming operations and what has been agreed to between the company and yourself, you should be able to continue your farm operations outside the petroleum operations area or be compensated for not being able to operate.

In carrying out petroleum operations, the company must ensure that its operations should, as far as possible, minimise any interference with activities of any other person who is using the land.

You do not have the liability for any of the petroleum operations.

Under the Act, the company that carries out the petroleum operations is considered the occupier of that part of the area in which it operates. The company therefore, is liable for petroleum operations on your land.

Equipment removal

The company must remove all equipment brought on to the land under the authority, within 60 days after the authority ceases to apply. Where an underground well bore cannot be physically removed, it has to be properly plugged.

Land rehabilitation

The company must rehabilitate any land that is used in carrying out any operation under the authority and must, as far as is practicable, complete the rehabilitation of the land before the authority ceases to apply to the land.

It is sufficient compliance if the company fully complies with the rehabilitation measures in the operation plan.

The Minister may do anything necessary to rehabilitate land that has been used for a petroleum operation if:

(a) not satisfied that the land has been rehabilitated as required by section 170 of the Act; or (b) satisfied that further rehabilitation of the land is necessary; or (c) the Minister has been asked to do so by the owner of the land.

The Minister may only do this if she or he has asked the company to rehabilitate the land and it has failed to do so within a reasonable period after the request.

The Minister will use the rehabilitation bond if required in these circumstances. If the rehabilitation bond is insufficient the Minister may recover as a debt due to the Crown any amount incurred.

If the Minister refuses to act on a request to rehabilitate the land, she or he must inform the owner of the land of the reasons for that refusal.

Section 113 of the Act, provides if an activity or event that is occurring, or is likely to occur, that in the opinion of the Minister, creates an immediate risk, which can cause:

(a) injury to one or more people, or

(b) property to be seriously damaged; or

(c) significant damage to occur to the environment; or

(d) significant damage to occur to any petroleum, source of petroleum or reservoir;

then, the Minister may issue a prohibition notice to the company barring it from:

• commencing, or continuing, any petroleum operation, or any activity relating to a petroleum operation, in the authority area; or
• taking any specified action in the authority area.

This prohibition applies until the Minister certifies that such direction included in the prohibition notice has been complied with, or until the expiry of a specified period contained in the notice.

The Minister may include, in the notice, directions for measures to be taken to remove or reduce the risk to which the notice relates and must specify in the notice from when the prohibition is to take effect.

The company must comply with the notice.

What if the company is not working pursuant to the Petroleum Act 1998?

The Minister may issue to the company an improvement notice requiring the company to take specified action within a specified period to stop the contravention, or failure to comply, from continuing or occurring again.

Land damage

You can seek compensation up to three years from the time if damage occurs on your property.

Before carrying out any petroleum operation, the company must take reasonable steps to ensure that the operation will not contravene the Victorian Archaeological and Aboriginal Relics Preservation Act 1972 nor the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 of the Commonwealth.

Onshore gas exploration and production is regulated differently depending on its type. Since 2000, a number of mineral exploration licences have been issued in Victoria for exploration for coal seam gas. To date, no production of coal seam gas has occurred. A number of companies currently have been granted exploration licences for coal seam gas in Gippsland, the Otways and Bacchus Marsh.

CSG ban

There is currently a ban on hydraulic fracturing ('fracking') and any petroleum exploration and petroleum production in the onshore areas of Victoria. For more information, please visit the Onshore Gas website.