Woodmac gives warning on PRRT review
PERTH (miningweekly.com) – Some $20-billion worth of investment in the Australian liquefied natural gas (LNG) sector could be at risk if any major fiscal changes were implemented without proper consideration of their impact on the country’s competitive position, advisory firm Wood Mackenzie (Woodmac) has warned.
The warning comes as the federal government launches a review into the operation of the Petroleum Resources Rent Tax (PRRT), a crude oil excise and associated commonwealth royalties.
The review is expected to advise the government to what extent the tax is operating as it was originally intended, and will address the reasons for the rapid decline of revenues.
Woodmac said on Friday that governments globally had pursued amendments of oil and gas tax regimes in response to the drop in oil prices, with 2015 seeing the highest level of fiscal changes globally since the mid-2000s.
“Australia has some of the most progressive fiscal regimes for its oil and gas and is one of several countries worldwide with purely profits based fiscal systems for offshore oil and gas, alongside such countries as the Netherlands, Norway, Denmark and the UK,” the advisory firm said.
Woodmac warned that a comparison of fiscal take between Australia and other countries can be misleading, as each jurisdiction has different project costs and economics and are at different stages in their productive lives.
“The recent wave of Australian LNG projects are forecast to deliver relatively low returns, well below the returns that Qatar projects have realised. So the value pie in Australia is smaller to share between government and investors. Despite a number of projects that will struggle to pay back their capital cost, over $50-billion in tax value is still forecast to be realised from the recent wave of Australian LNG projects over their lives,” the company said.
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