The historic Trans-Pacific Partnership Agreement (TPP), the largest multi-continental trade agreement since APEC in 1989, is expected to deliver enormous benefits to Australia and unprecedented new opportunities in the rapidly growing Asia Pacific region.
But while the agreement has overwhelmingly been hailed a triumph for the agricultural, medical and e-commerce industries, is it a good deal for the Australian oil and gas industry?
Benefits to Australian oil and gas
By setting common international trade and investment standards between member countries, the TPP aims to make doing business across the region easier, reducing red tape and business costs.
There are several areas where the domestic oil and gas industry will benefit, including greater facilitation of oilfield services exportation, streamlined investment processes and easier entry arrangements for oil and gas professionals and employees. However, one of the greatest benefits to the industry is the reduction in trade barriers through the reduction or abolishment of tariffs.
Reduction in trade barriers
The TPP will slash barriers to Australian goods exports, services and investment and eliminate 98 per cent of all tariffs, including those applicable to resources and energy.
Australia’s exports of resources and energy products to TPP member countries were worth close to AUD$47 billion in 2014, representing 30 per cent of Australia’s total exports of these products.
The TPP delivers certainty and significant gains to Australian producers and exporters of resources and energy products.
The agreement locks in the duty- and quota- free access Australia currently enjoys into a number of TPP markets for major exports such as coal, iron ore and liquefied natural gas.
Other key market access gains include:
- Elimination of Vietnam’s tariffs on butanes, propane and liquefied natural gas within seven years of entry into force. Australian exports of these products to Vietnam were valued at AUD$9 million in 2014
- Elimination of Vietnam’s 20 per cent tariff on petroleum (Australian petroleum exports to Vietnam were AUD$11 million in 2014)
- Elimination of Peru’s tariffs on iron ore, copper and nickel upon entry into force of the TPP.
Australia’s mining equipment, technology and services (METS) and oilfield services sectors in countries like Vietnam, Malaysia, Mexico, Chile and Peru will gain strong benefits. There will be major new commercial opportunities for Australia’s METS service providers, including through:
- Mexico’s liberalisation of its energy sector, which, for the first time, will allow Australian companies to be able to bid to participate in the exploration, production, processing and distribution of oil, gas and geothermal resources.
- Brunei Darussalam and Vietnam locking in future reforms to local content regimes, or otherwise committing to a level playing field between Australian and foreign suppliers providing goods and services in the mining, oil and gas sectors.
- New rules on large state-owned enterprises like PETRONAS, PEMEX, VINACOMIN and PETROVIETNAM, which will help ensure that Australian goods and service providers can compete fairly for contracts.
- Prohibitions on the introduction of new export taxes and commitments for the elimination of existing export taxes in Malaysia and Vietnam, providing greater certainty for Australian mining and energy companies operating in these countries.
The TPP’s new rules on state-owned enterprises (SOEs) will level the playing field between Australia’s privately-owned mining, oil and gas companies and the large SOEs that dominate these sectors in some TPP countries. The TPP will help ensure that the member countries do not provide financial support to their SOEs that would give them an unfair advantage over their Australian competitors.
Streamlined investment processes and greater protections
Greater investment protections and streamlined processes will help propel investment by Australian miners, oil and gas companies, METS and oilfield goods and service providers in TPP countries.
TPP countries have committed to not introducing new foreign investment screening regimes or have extended higher preferential investment screening thresholds to Australian investors. Australian investments into Canada of below C$1.5 billion (currently AUD$369 million) will be exempt from investment screening processes.
The TPP will also promote further growth of foreign investment in resources and energy in Australia by increasing the screening threshold at which private foreign investments in the mining and energy sectors are considered by the Foreign Investment Review Board (FIRB). The threshold will be raised from
AUD$252 million to AUD $1,094 million for all TPP countries, except in relation to uranium and plutonium extraction and nuclear facilities.
Temporary entry arrangements for professionals and employees
Australian companies will be able to transfer executives and managers more easily to work in TPP countries for extended periods, and face fewer hurdles in obtaining visas for Australian contractors working on a temporary basis.
Independent Australian professionals and technicians providing services to the mining, oil and gas sectors will enjoy certainty over visa arrangements and periods of stay in Brunei Darussalam, Canada, Chile, Malaysia, Mexico, Peru and Vietnam.
These countries have also guaranteed that Australian installers and servicers of niche mining- and oilfield-related manufactured goods and technologies will be able to temporarily enter these markets to undertake installation and maintenance activities.