Financial capability policy for petroleum and greenhouse gas applications

Application

This policy sets out how the Minister for Energy and Resources (the Minister) (or delegate) assesses whether an applicant has the financial capability to carry out work associated with the exploration, injection, production and/or storage of petroleum and greenhouse gas.

This policy applies to the following types of authorities/titles:

Petroleum Act 1998

• Exploration permits (s20(c))
• Production licences (s51(a)(iii))
• Special access authorisations (s85(2)(c)(iii))
• Special drilling authorisations (s95B(2)(c)(iii))
• Transfer of authorities (other than a special drilling authorisation) (s107(2)(b)(iii))

Offshore Petroleum and Greenhouse Gas Storage Act 2010

• Work-bid petroleum exploration permits (s86(3)(d))
• Cash-bid petroleum exploration permits (s93(6)(a)(iii))
• Special petroleum exploration permits over a surrendered block or certain other blocks (s98(4)(a)(iv))
• Pipeline licences (s215(2)(f))
• Work-bid greenhouse gas assessment permits (s297(3)(d))
• Cash-bid greenhouse gas assessment permits (s306(6)(a)(iii))
• Applications for a greenhouse gas injection licence by the holder of a greenhouse gas assessment permit or greenhouse gas holding lease (s380(3)(c)(iii))
• Applications for a greenhouse gas injection licence by the holder of a petroleum production licence (s393(3)(c)(iii))
• Transfer of titles (s510(b)(iii))

In this policy, the term ‘applicant’ refers to a person (or group) applying for an authority/title. It also denotes an existing authority holder or titleholder applying to renew a work authority.

Objectives

This policy aims to:

• ensure applicants meet their legal requirements to submit information about their financial resources, so the Minister can robustly assess an application
• give landholders, government and the wider community confidence that applicants have enough financial resources to carry out works safely, protect the environment and carry out rehabilitation
• support a competitive and viable petroleum sector by granting authorities/titles only where applicants can clearly fund works
• ensure titles/authorities that grant exclusive rights to petroleum and greenhouse gas resources are issued only to applicants who can meet their financial obligations
• clearly explain how the department assesses applications in a transparent, fair and consistent way, noting that:
  • an authority/title may be granted if the applicant is likely to meet their financial requirements
  • an authority/title may be refused if the applicant is unlikely to meet their financial requirements
  • if an authority/title is granted, the applicant must meet financial capability requirements for the full lifecycle of the authority/title, and the authority/title may be cancelled if an applicant can no longer meet its minimum financial requirements.

This policy applies to all applicants and any related parties relied on to meet the financial capability criteria. A related party can be: a controlling entity (e.g. parent company), a director or relative of a director, an entity controlled by a related party or an entity acting together with a related party.

Definition of ‘financial capability’

Financial capability is the applicant’s ability to meet the financial obligations for the full lifecycle of the authority/title, while continuing to meet its other financial obligations. This includes but is not limited to:

• proposed works under the authority/title
• activities in line with the agreed work program
• rehabilitation of the site to the standard required for further licensing and development.

When assessing an application under the relevant acts and regulations, the department will assess whether the applicant can fund the first 3 years of operations. This includes maintaining solvency and servicing any loans that may be called during the life of the authority/title.

Minimum requirements for exploration permit applications

This part of the policy applies to the following types of authorities/titles:

Petroleum Act 1998

• Exploration permits
• Special access authorisations
• Special drilling authorisations by exploration licence holders
• Transfer of authorities relating to the above (other than a special drilling authorisation)

Offshore Petroleum and Greenhouse Gas Storage Act 2010

• Work-bid petroleum exploration permits
• Cash-bid petroleum exploration permits
• Special petroleum exploration permits over a surrendered block or certain other blocks
• Work-bid greenhouse gas assessment permits
• Cash-bid greenhouse gas assessment permits
• Transfer of titles relating to the above

An application for any of the above authorities/titles must include the following:

Authorities and titles held

• A list of all authorities and titles the applicant holds in Victoria and Australia, including in Commonwealth waters
• If a parent company guarantees the costs and liabilities of a subsidiary, a list of authorities and titles held by the parent company

Financial information (3-year period)

• Projected costs to deliver work programs for all listed authorities/titles
• Projected costs to deliver the work program under the authority/title being applied for
• Annual fees for all other authorities and titles held in Australia by the applicant (or parent company, if applicable)
• Ongoing maintenance costs for any upstream petroleum infrastructure

Funding approach

• An explanation of how the applicant will fund the first 3 years, including:
  • minimum expenditure commitment
  • ongoing operating costs
  • estimated annual insurance costs.

Financial position

• Details of the applicant’s working capital and liquid assets (e.g. cash, cash equivalents, marketable securities or trade receivables)
• An assessment of the applicant’s net financial position against the required expenditure for the first 3 years, if the authority/title is granted
• An estimate of decommissioning and rehabilitation costs

Supporting evidence

Applicants must provide evidence of their financial resources, including:

• Financial statements for the most recent complete financial year:
  • audited (if available)
  • management accounts (if not).
• Financial statements from previous financial years
• Details of any planned capital-raising activities, asset sales, future revenue/profits, farm in/out agreements to fund projected 3-year costs
• If a parent company guarantees costs and liabilities, a letter of guarantee signed by:
  • 2 directors
  • one director in the case of a sole-director company.

Additional information that may assist the assessment

The following elements can help Resources Victoria assess the applicant’s financial capability:

• Current ratio: working capital and liquid assets divided by current liabilities
• Quick ratio: liquid assets divided by current liabilities
• Details of loans and the likelihood they may be called during the life of the authority/title
• Details of any line of credit from a recognised financial institution
• Expected gross and/or net profitability over the first 3 years
• Any other information showing year-on-year cash flow positivity, including planned capital-raising activities

Minimum requirements for production licence applications

This part of the policy applies to the following types of authorities/titles:

Petroleum Act 1998

• Production licences
• Special drilling authorisations by holders of a production licence
• Transfer of authorities relating to the above (other than a special drilling authorisation)

Offshore Petroleum and Greenhouse Gas Storage Act 2010

• Pipeline licences
• Applications for a greenhouse gas injection licence by the holder of a greenhouse gas assessment permit or greenhouse gas holding lease
• Applications for a greenhouse gas injection licence by the holder of a petroleum production licence
• Transfer of titles relating to the above

An application for any of the above authorities/titles must include the following:

Authorities and titles held

• A list of authorities and titles the applicant holds in Victoria and Australia, including in Commonwealth waters
• If a parent company guarantees costs and liabilities of any subsidiaries, a list of authorities and titles held by the parent company

Financial information for the full lifecycle of the authority/title

• Projected costs to deliver work programs for all listed authorities/titles
• Projected costs to deliver the work program under the authority/title being applied for
• Annual fees for all other authorities and titles held in Australia by the applicant (or parent company, if applicable)
• Ongoing maintenance costs for any upstream petroleum infrastructure
• Expected costs for rehabilitation and closure
• Anticipated royalties for producing assets under an authority/title

Funding approach

• An explanation of how the applicant will fund the first 3 years, including:
  • minimum expenditure commitment
  • ongoing operating costs
  • estimated annual insurance costs.
• An explanation of how the applicant will fund costs beyond the first 3 years, including ongoing expenditure and costs relating to rehabilitation and closure

Financial position

• Details of the applicant’s working capital and liquid assets (e.g. cash, cash equivalents, marketable securities or trade receivables)
• An assessment of the applicant’s net financial position against the required expenditure for the first 3 years, if the authority/title is granted
• An estimate of decommissioning and rehabilitation costs

Supporting evidence

Applicants must provide evidence of their financial resources, including:

• Financial statements for the most recent complete financial year:
  • audited (if available)
  • management accounts (if not).
• Financial statements from previous financial years
• Details of any planned capital-raising activities, asset sales, future revenue/profits, farm in/out agreements used to fund projected costs over the lifecycle of the authority/title
• If a parent company guarantees costs and liabilities, a letter of guarantee signed by:
  • 2 directors
  • one director in the case of a sole-director company.

Additional information to support assessment

The following information will help Resources Victoria assess the applicant’s financial capability:

• Current ratio: working capital and liquid assets divided by current liabilities
• Quick ratio: liquid assets divided by current liabilities
• Details of loans and the likelihood they may be called during the life of the authority/title
• Details of any line of credit from a recognised financial institution
• Expected gross and/or net profitability for the first 3 years and over the full lifecycle of the authority/title
• Any other information showing year-on-year cash flow positivity, including planned capital-raising activities

Assessment process

Resources Victoria reviews the information provided to understand:

• the applicant’s current financial position
• estimated costs of works under the authority/title
• any other expenditure associated with the authority/title.

Resources Victoria then assesses the applicant’s expected net financial position over a 3-year period. This assessment assumes the authority/title is granted and works proceed. It includes liabilities under the authority/title and any other liabilities.

Resources Victoria makes a decision based on the expected net financial position and any other evidence that shows the applicant can meet all costs and liabilities over a 3-year period. An application will usually meet the financial capability criteria if the applicant can clearly meet all financial obligations for that period. Resources Victoria may also consider:

• how complex it is to estimate the cost of works, decommissioning and rehabilitation
• whether the applicant can meet financial obligations under the authority/title while maintaining its other financial obligations
• how complex the financial assessment is, including whether it relies on cash and liquid assets or on debt servicing and capital raising
• how clearly the applicant’s financial position can be determined based on the available information
• whether the applicant has unrestricted access to funds and/or security if relying on support from another entity or source
• the applicant’s past financial performance in Victoria, including timely payment of fees, rent and royalties.

If Resources Victoria cannot sufficiently assess the applicant’s ability to fund operations, it may refer the application to external consultants.

External consultants

Resources Victoria may engage external consultants to assess an applicant’s financial capability where:

• it cannot make a sufficiently accurate assessment due to a lack of specialist expertise or a lack of knowledge of specific information relevant to the application; or
• an external consultant is likely to identify information not available to Resources Victoria that would materially improve the assessment.

When engaging external consultants, Resources Victoria complies with all legislative and regulatory requirements for information sharing and confidentiality. This includes requirements not to share information about an applicant’s financial resources or any other information obtained except in accordance with the Petroleum Act 1998, the Offshore Petroleum and Greenhouse Gas Storage Act 2010, the Privacy and Data Protection Act 2014 and any associated regulations.

External consultants may assess:

• publicly available information
• information shared in line with legislative requirements
• information provided directly by the applicant.

Consultants may also undertake their own independent information-gathering processes.

Parliamentary Inquiry into Decommissioning Oil and Gas Infrastructure

The Parliamentary Inquiry into Decommissioning Oil and Gas Infrastructure is considering matters that may be relevant to this policy.

The policy may be updated following the Victorian Government’s consideration of any recommendations arising from the inquiry. This may particularly affect development and production licences covered by this policy.

Page last updated: 02 Apr 2026