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Report highlights LNG investment potential for treasury

Image shows Australian currency

Photo by Bloomberg

26th April 2023

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – A new report by advisory firm Wood Mackenzie, estimates that Australia’s state and federal governments will benefit from A$100-billion in taxation receipts from gas export projects over the next two decades.

Wood Mackenzie’s 'LNG Taxation Estimates and Review' found $310-billion, or A$406-billion, was invested in liquefied natural gas (LNG) capital and operations in the 2010s. 

“The construction phase for these projects occurred between 2009 and 2017 and contributed significantly to the second half of Australia’s ‘mining boom’ - widely acknowledged by economists to have raised Australian real wages, disposable income and reducing unemployment, as well as driving A$70-billion to A$100-billion of yearly export earnings from LNG from 2020 onwards.

“Much of this $310-billion of capital investment was spent over a five- to six-year period prior to any revenues being generated, and therefore the cumulative debt positions incurred by each project before first gas sales were significant,” the report stated.

The sector’s taxation profile is changing and companies which made these massive multibillion-dollar investments into large, high-risk nation-building projects are now “paying substantial levels of corporate taxation” as their investments are recovered, Wood Mackenzie said. 

The report, commissioned by the Australian Petroleum Production & Exploration Association (Appea), estimated that A$100-billion, or $76-billion, of remaining government take is due from these projects over the next two decades.

“The current global energy crisis is likely to see higher commodity prices maintained over the coming years. As long as Australian LNG producers are able to meet targeted output levels at a low cost, significant short-term upside taxation should continue to directly flow through to the Australian treasury and state governments,” the report added.

Appea CEO Samantha McCulloch said that there was A$100-billion from LNG projects heading for taxpayers in the next 20 years, helping fund policies and building roads, schools and hospitals. 

“This is the extraordinary return Australians receive from the industry’s A$400-billion investment – on top of the thousands of jobs along the supply chain this supports. Gas companies are among the biggest taxpayers in Australia. 

“The sector is committed to ensuring domestic supply and our exports underpin our domestic energy security while delivering substantial benefits to Australians.” 

The report comes after new forecasts last week showed Australia’s oil and gas industry is set to deliver A$16.2-billion to governments this financial year, up from A$6.4-billion previously, continuing to underpin critical spending on public services and infrastructure. LNG exporters are forecast to contribute over A$1-billion of this industry total. 

Edited by Creamer Media Reporter

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