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This will cause a huge dent in our imcome ledger.

Australia would face an $ 8 bn deficit on oil imports if new discoveries were not made soon, the head of the biggest Australian-owned petroleum company has said. Woodside Petroleum managing director John Akehurst said that urgent action was needed to stop Australia's self-sufficiency in oil falling from 80 % to less than 40 % by 2010.

This financial year Australia was expected to have a surplus on liquid hydrocarbons, which included petroleum, of $ 1.2 bn this financial year. Mr Akehurst said this would become a deficit of $ 7.6 bn by 2009-2010. Australia's proven supplies of oil amount to just over 10 years of present annual production.

Not only do we lose this income but we gotta find $7.6 bn a year to pay for the new import expense.

Oil explorers and producers like Woodside will have to live with declining oil prices and build these into our investment decision making," he said. "We will need to continue to invest heavily in new technology so as to better find and develop the smaller, higher cost, more remote and more technically complex fields remaining around Australia."
Mr Akehurst said apart from the impact on Australia's current account deficit, the fall-off in oil production would put the national economy at risk as the country relied on overseas petroleum

'Australia is currently effectively consuming oil reserves three times as fast as [it is] finding them. Australia is at a critical point in its ability to continue to meet the majority of its oil requirements from local production. Petroleum demand continues to grow, production from existing fields is declining and the industry's interest in new oil exploration areas in Australia is at a low level. However, options are available to slow down this trend in the growth of oil imports,' Mr Akehurst said.

Ya well WPL is gonna be a winner(long term) if the Co's right.

'Australia currently has over 100 years of gas reserves at current production levels. Substitution of gas for oil is hence an important issue for Australia, with the substantial reserves of gas that Australia has,' he said.

This trend will be repeated throughout Aust, going forward.
The use of natural gas in Western Australia is forecast to almost double over two decades from fiscal 2000 to fiscal 2020. The Australian Bureau of Agricultural & Resource Economics (ABARE) has indicated natural gas usage in the state will increase from 343 PJ to 685 PJ over this period.
It is anticipated by ABARE that the mining sector will continue to be the largest energy consumer by industry sector. Western Australia's North West Shelf is expected to be the major source of gas supply during this period.

The biggest threat will come from middle east countrys

With 35 % of the world's natural gas reserves, the Middle East stands to capitalize on a sharpening appetite for the fuel worldwide. Natural gas was the world's fastest-growing fuel in 2000, with global consumption rising by 4.8 %, the highest rate since 1996.

Shorter term this seems to be the driver of oil/energy price.

Iraq has jolted oil markets and will continue to influence decisions taken by key players in the sector for several months to come, the International Energy Agency said in its monthly report. The agency lists three factors affecting crude oil prices -- the threat of US military action against Iraq, the UN oil-for-food program and pricing mechanisms imposed on Baghdad through the UN sanctions regime.

Always something to consider is the close ties between Iraq & Russia.

Russia's energy minister said in his opening remarks to a session of the Russian-Iraqi commission for trade, economic and scientific cooperation that Iraq was Russia's main strategic partner in the region. Russia "makes political and diplomatic efforts in the UN Security Council with an aim to settle the Iraqi problem and seeks to find mutually acceptable solutions with other countries, first of all with the USA," Energy Minister Igor Yusufov said.

Yusufov said that it the economic embargo was lifted from Iraq, "that would "create a basis for full-scale cooperation between Russia and Iraq." According to the minister, Russia will continue efforts in that direction. Yusufov believes that positive changes in the Russian economy were a stimulus for the development of economic ties between Moscow and Baghdad.
He said new technological developments by Russia, in particular to increase the production of oil wells, "could be of great interest for Iraq." The minister said Russian companies had received major contracts to build Iraqi facilities, citing among them the Eastern Al Jazira irrigation complex worth $ 70 mm .

You can see how these ties work,

Iraq's Oil Minister Amir Muhammed Rasheed has invited Russian oil companies to take part in digging 2000 oil wells. Rasheed, currently in Moscow to strike a long-term cooperation agreement with Russia, also said that the volume of trade exchange between Baghdad and Moscow reached $ 6 bn since the start of an "oil-for-food" deal between Iraq and the United Nations.

Rasheed said in Moscow that both Iraq and Russia were working on 67 projects in oil, gas, transport, communications and other fields. He said Russia was the top importer of Iraqi goods, including 1 bn barrels of oil a year.
Russia has close ties with Baghdad, whose debt to Moscow is close to $ 8 bn. Some of its leading companies have struck major deals to explore and exploit Iraqi oil deposits once the United Nations lifts decade-old sanctions imposed after Iraq's invasion of Kuwait.

And 2 weeks later the US agrees,
The US lifted blocks on more than $ 200 mm (£ 140.8 mm) worth of Russian contracts in an attempt to win Moscow's agreement to refocus United Nations' sanctions against Iraq, diplomats said.
The release of the contracts, described as a sweetener, secured Russia's approval -- after a year of protest -- of a list of goods that countries could sell to Iraq without violating sanctions.
Washington is expected to release additional Russian contracts in the next few weeks, lifting the total value of the deal to nearly $ 750 mm, according to one diplomat.

Last June, the US released more than $ 80 mm of Chinese contracts it had blocked in order to gain Beijing's support for an earlier resolution retooling UN sanctions. The US released a contract it had blocked last August. The contract was for $ 105 mm worth of electricity equipment for a thermal power station, to be sold to Iraq by Technopromexport of Russia.
The second largest contract was for $ 58 mm of vehicles for the food-handling sector, to be sold by JSC Hydromash Service, also a Russian company. Other Russian contracts included, $ 34 mm for the agricultural sector, $ 13.2 mm for telecommunications equipment, $ 7.1 mm for bulldozers, $ 3 mm for water sanitation equipment and $ 2 mm in the oil sector.

Some longer term factors to consider.
You can't discount energy cost it always plays a big part in the economy , we for a long time have been a winner in the oil import/export balance but that is looking like changing.


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