Booming Energy Profits Targeted by Australia With Tax Hike

(Bloomberg) -- Offshore liquefied natural gas producers in Australia will be required to pay more tax from July as the government seeks to take a larger share of booming energy sector profits.

The government on Saturday said it’s expecting to generate an additional A$2.4 billion ($1.6 billion) in revenue through 2027 by winding back concessions for energy companies. The new policy comes amid an evaluation of the existing Petroleum Resource Rent Tax, which covers the country’s massive LNG export sector and has faced widespread criticism.

The revamp will bring forward revenue from the PRRT, adding about A$600 million to the coming federal budget, which is widely expected to deliver a small surplus — the first in 15 years.

“These changes will make a meaningful contribution to the Budget that we hand down on Tuesday night, helping to support our efforts to get the nation’s finances back on track,” Treasurer Jim Chalmers said in a statement.

The new rules include limiting taxable deductions for use against 90% of assessable income, as a way of addressing an undervaluation of gas in PRRT policy.

The PRRT has been attacked over how producers can offset payments even as they report record profits. An initial report in 2017 concluded that the design likely resulted in significant undervaluation of the taxable gas in vertically integrated projects.

“It’s been clear for some time that the PRRT isn’t up to scratch,” Chalmers said. “These sensible changes see the offshore LNG industry pay more tax, sooner. They also deliver a fairer return to the Australian people from the resources they own.”

Compared to other gas-exporting nations, Australia gathers little tax revenue from its oil and gas shipments. Major shipper Qatar has built an entire economy on petroleum royalties, earning almost $70 billion from oil and gas revenue in 2022.

The Australian Petroleum Production and Exploration Association said the announcement “will provide greater certainty for our industry to consider the future investment required to maintain both domestic and regional gas supply security for our customers.” The changes would see more revenue collected earlier to address budget pressures, it said in a statement Sunday.

Australia vies with Qatar and the US as the world’s top exporter of LNG, a sector that saw prices surge last year amid a squeeze on energy supply as consumers shunned Russian exports following its invasion of Ukraine.

Woodside Energy Group Ltd., Australia’s biggest oil and gas producer, saw underlying earnings more than triple to a record $5.2 billion in 2022.

The government will continue consultation on the final design and implementation for the policy, according to the Saturday statement.

--With assistance from David Stringer and Georgina McKay.

(Updates with comment from gas industry in 9th paragraph)

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Author: Sybilla Gross