By Anthony Brown
Since discovering what appears to be a major oil find in the Timor Gap in February 1994, Brisbane-based oil and gas company Petroz NL has been the focus of protests over Australian exploitation of the situation in East Timor.
Protesters argue the immorality and illegality of Australian oil and gas companies moving into the Timor Gap, saying that by working with the Indonesian authorities, they are taking advantage of the East Timorese and helping to maintain Indonesian control over their country.
They contend that for all the dollars in royalties Australia and Indonesia can expect, not one cent will go into the pockets of the East Timorese.
Petroz NL was incorporated as a business in 1969 under the name of Offshore Oil NL. In 1986 it changed its name to Petroz.
The Sydney-based Australian Gas Light Company had a 59.85% controlling interest in Petroz until it sold its interest to institutional and private investors in September 1993.
Petroz is now seen as an independent oil and gas company, with its largest institutional shareholders being ANZ Bank and AMP, each with an interest under 5%.
However, according to a journalist from one of Queensland's leading business publications, Business Queensland, gas and construction giant Boral Limited is emerging as a major shareholder.
Petroz NL has three interests in the Timor Gap Zone of Cooperation.
Following on from the 1989 Timor Gap Treaty, Australia and Indonesia signed the Timor Gap Zone of Cooperation Treaty in early 1991.
Basically Indonesia and Australia have divided about 60,000 square kilometres of the Timor Gap into three commercial administrative zones: Zone A, Zone B and Zone C.
The northern Zone C is administered by Indonesia, the southern Zone B by Australia. Zone A, in the centre, is administered by both countries under a Joint Authority which issues exploration licences.
It is in Zone A where most exploration is taking place.
In Zone A, there are two major exploration blocks: Zone of Cooperation (ZOCA) 91-12 in the west and ZOCA 91-08 in the east.
Petroz NL originally had a 100% interest in oil and gas exploration in both. But according to a Business Queensland journalist, it wasn't able to afford the cost of exploration by itself. So it negotiated what are called farm-out agreements with other companies for both blocks.
In the Elang field in ZOCA 91-12, Petroz divided its share with three other companies so that they would chip in for exploration and development costs.
The companies are BHP Petroleum (which has a 42% stake in any finds), Inpex Sahul Ltd (21%) and South Australian oil and gas company Santos Ltd (21%), with Petroz retaining about 15%.
In the Elang field last February, Petroz, acting as exploration operator or manager for this group of companies, discovered what is believed to be a major oil find. Elang flowed at a rate of 5800 barrels of oil per day, the first significant oil discovery in the Timor Gap.
In November 1994, the semi-submersible drilling rig, Atwood Eagle, while assessing the commercial viability of the Elang field for the group, found oil flowing at 7500 barrels per day just 1.7 kilometres west of the February drill.
The group is currently assessing the field for commercial development. The chances that ELANG will be developed appear to be strong.
In his address to shareholders at the 1994 annual general meeting, Petroz chairperson Gregory Swindon said the company was optimistic that Elang was a commercial field. Swindon said that if it was a commercial discovery, he expected production to begin in the second half of 1997.
Some analysts predict that the Elang field may hold up to 50 million barrels of oil.
In a memorandum to the Australian Stock Exchange in December, Petroz announced yet another major discovery, about 15 km from the Elang find, at the Kakatua-1 field.
This field produced a flow of 9000 barrels of oil per day. BHP Petroleum, acting as operator, is currently assessing Kakatua-1 for commercial development.
In the ZOCA 91-08 block, Petroz NL, Shell Development (Australia), South Australian company SAGASCO Resources Ltd (a Boral subsidiary) and Brisbane-based Crusader Ltd are exploring what some experts believe to be one of the biggest wells in the Timor Gap, the Sikatan-1 well. Each company has a 25% share of a farm-out agreement.
Besides having interests in Area A of the Zone of Cooperation, Petroz also has interests in the Australian zone, Area B. There, Petroz is exploring an area called WA-74-P, where it has an 83.75% interest.
Since the Elang discovery, major stockbrokers such as Wilson HTM and Morgan Stockbroking have been advising investors to buy Petroz stock for its enormous potential.
The company's market capitalisation rose sharply with the Elang discovery: from $24 million in June 1993 to $94 million in June 1994 to $110 million in October 1994 — a rise of some 352%.
Besides its involvement in the Timor Sea, Petroz also has natural gas exploration and development interests in the Surat Basin in western Queensland, Brisbane's main source of gas.
In 1993 Petroz generated about 50% of its revenue from the sale of Surat Basin gas.
This was sold to distributor Allgas Energy Ltd and accounted for about one-third of Brisbane's gas requirements.
All of Petroz's exploration activities are funded by the cash flow from its Surat Basin production interests. In its 1993 annual report, Petroz told shareholders that its Surat Basin interests were mainly mature and likely to decline before production was developed in the Timor Sea.
In the same annual report, Petroz declared that its strategic direction for the future was based on its Timor Sea activities.
In effect, this means that Petroz depends on the sale of Surat Basin gas to continue its exploration of the Timor Sea and the future development of oil and gas there. It also means that as its Surat Basin interests dry up, it needs to develop Timor Sea oil and gas to survive.
According to a recent report in Business Queensland, Petroz has just enough Surat Basin gas to supply Brisbane for a little less than 18 months.