Highlights of CPTPP – Mining & Energy

Continuing our series of articles on the recently signed TPP-11 free trade agreement (also known as the CPTPP), we now take a closer look at what it means for the mining and energy sector.

Australia continues to rank as one of the world’s leading mining nations, with substantial identified resources of major minerals and fuel close to the surface. In a report in the March 2018 Research and Quarterly, the Office of Chief Economist forecast the 2017-18 ‘value of Australia’s resource and energy exports to reach its highest level on record, $230 billion,’ within the next five years, delivering over $1 trillion in resources and energy export income. The report highlights the final phase of Australia’s remarkable mining boom, with the last of Australia’s Liquified natural gas (LNG) projects scheduled for completion by the end of 2018, and growth in iron ore exports predicted to slow from 2018 to 2019, similar to other resources including gold, coal and base metals.

Australian energy and resource exports to TPP-11 markets are valued at around $42 billion, with significant imports by Japan of thermal coal (41%), metallurgical coal (22%) and gas/LNG (48%).[1]

TPP-11 eliminates or reduces barriers to entry in a number of key areas and markets, enabling greater investment and productivity efficiencies for Australian companies. So, where and how will our mining and energy sector benefit?

Commodity Country Volume of Australian exports 2018
Thermal Coal Japan Imports 41% of exported thermal coal
Malaysia Imports 3% of exported thermal coal
Metallurgical Coal Japan Imports 22% of exported metallurgical coal
Iron Ore Japan Imports 8% of exported Iron Ore
Gas/LNG Japan Imports 48% of exported LNG
Crude Oil and refined products Malaysia Imports 10.237 billion litres
Singapore Imports 8.994 billion litres
Japan Imports 4.074 billion litres
Aluminium, Alumina & Bauxite Japan Imports 2 Million produce aluminium of total produced 45 million

Taken from March Resources and Energy Quarterly

Resource & energy exports

In addition to locking in the tariff- and quota-free access, Australia currently enjoys key market access gains including:

  • Elimination of Vietnam’s tariffs on butanes, propane and liquefied natural gas within seven years.
  • Elimination of Vietnam’s 20 per cent tariff on refined petroleum. Australian petroleum exports to Vietnam were $14 million in 2016-17.

New exploration, extraction and production opportunities

Parties have committed to lock in current access and recent landmark reforms, as well as guarantee that future reforms of their investment regimes will automatically benefit TPP-11 countries.  Key outcomes for Australia include:

  • Vietnam opening its mining investment regime.
  • Mexico allowing foreign companies to participate in its energy sector.
  • Canada allowing Australian investors to apply for an exemption from the 49 per cent foreign equity limit on foreign ownership of uranium mines, without first seeking a Canadian partner.
  • Brunei and Malaysia making first-time commitments on investment in the mining sector, including coal.
  • Malaysia making first time commitments in the oil and gas sector, providing Australian service suppliers and investors with enhanced transparency.
  • Brunei and Vietnam locking in their investment and local content regimes for oil, gas and power development and future reforms.
  • Prohibitions on the introduction of new export taxes and commitments for the elimination of existing export taxes in Malaysia and Vietnam.

The new rules on State-Owned Enterprises (SOEs) will level the playing field and help ensure that governments do not give an unfair advantage to their domestic SOEs through subsidies.

Mining Equipment, Technologies and Services (METS) and energy services

Australia’s cutting-edge providers of METS and oilfield goods and services deliver a diverse range of innovation across the supply chain, including in; exploration, extraction, engineering, processing, power generation, environmental management, safety, research and development, education and training and community engagement.

Over 66 per cent of Australia’s $90 billion METS sector companies export, collectively valued at $15 billion[2]. TPP-11 will support further export expansion into South-East Asia and the Americas, with key outcomes including:

  • Duty-free access for mining equipment, including elimination of Mexico’s 15 per cent tariff.
  • Brunei, Mexico and Vietnam providing commitments guaranteeing access for Australian METS and oilfield goods and services providers.
  • New commitments from Chile and Mexico on the provision of; consulting, research and development, engineering, environmental, mining and technical testing and analysis services, delivering certainty for Australian suppliers.
  • Rules to ensure non-discrimination when competing for contracts to supply goods and services in TPP-11 markets.  Some of Australia’s METS and oilfield service providers’ biggest customers are large SOEs such as PEMEX (Mexico) and VINACOMIN.
  • Australian suppliers will be able to bid for government procurement opportunities with PEMEX, for the first time.

Streamlined investment processes and greater protections

Commitments to not introduce new foreign investment screening regimes, and the extension of higher preferential investment screening thresholds to Australian investors, will provide greater protection for the sector.  Australian investments into Canada of below C$1.5 billion (currently $369 million) and into Mexico of below US$1 billion, will be exempt from investment screening processes.

Conversely, the agreement also facilitates productive foreign investment in Australia by increasing the screening threshold at which private foreign investments in mining and energy from TPP-11 countries are considered by the Foreign Investment Review Board (FIRB) from $261 million to $1.134 billion (except for uranium and plutonium extraction and nuclear facilities).

Temporary entry arrangements for professionals and employees

Importantly in a global age, Australian companies will be able to more easily transfer executives and managers throughout TPP-11 countries for short-term periods, while independent professionals will enjoy certainty over visa arrangements and periods of stay.  Brunei, Canada, Chile, Malaysia and Mexico have guaranteed that Australian installers and servicers of niche goods and technologies will be able to temporarily enter to undertake installation and maintenance activities.

If you’d like to discuss how free trade agreements could affect your exports, or the range of Crowe Horwath’s export services including Export Strategy planning, Supply Chain Optimisation and Export Grant applications, please contact us directly for a friendly chat, or contact your local Crowe Horwath adviser.

Sam Lawrence, Senior Manager, Global Trade and Customs

Don Collins, Partner, Business Advisory


[1] Source Resources and Energy Quarterly March 2018 – Dept Industry Innovation and Science

[2] Source: Austmine