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Australian Energy Producers (AEP), representing the country’s upstream oil and gas exploration and production industry, has pointed out that the findings of a recent report reinforce the benefits of Australia’s existing fiscal framework, including the Petroleum Resource Rent Tax (PRRT), with the spike in oil prices having the potential to boost federal and state budgets by $17 billion per year.
Based on a new independent analysis by Wood Mackenzie, Australia’s oil and gas industry would deliver almost $160 billion in taxes and royalties to governments over the next five years if high international prices persist under existing tax settings, representing around $80 billion more than under typical long-term price assumptions, equating to nearly $17 billion per year in additional revenue flowing to federal and state budgets.
Samantha McCulloch , Australian Energy Producers’ Chief Executive, commented: “Australia’s oil and gas fiscal regime is designed to deliver strong returns to the community, and this analysis shows it does exactly that, especially when prices are high . As global energy markets tighten and commodity prices increase, the benefit flows directly to Australian governments through higher company tax, royalties and PRRT receipts.
“The analysis shows the PRRT would deliver the largest uplift in tax revenue, with a 70 per cent increase in oil prices almost trebling receipts from $13.5 billion to $38.9 billion over five years.”
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According to Australian Energy Producers, the analysis compares a sustained oil price of around $120 per barrel with a typical long-term assumption of $70 per barrel, showing government revenues increase as commodity prices rise.
McCulloch added: “Australia’s oil and gas industry is making a substantial contribution to government revenues, while continuing to deliver reliable energy at home and supporting energy security across our region.
“Domestic gas prices remain stable and well below international levels, and our LNG exports are helping secure supply chains for critical fuels into Australia from key regional partners.”
Australian Energy Producers’ Chief Executive points out that the report’s findings come at a time when global energy market disruptions have underscored the importance of the country’s oil and gas industry to domestic supply and regional energy security.
McCulloch highlighted: “Assertions that the industry is not paying its fair share, or that the tax system does not respond to higher prices, are demonstrably wrong. In contrast, higher taxes will make Australia uninvestable for new oil and gas projects, putting our future energy security at risk .”
In the Australian Energy Producers’ view, Australia’s oil and gas industry is already the country’s second-largest corporate taxpayer, contributing $21.9 billion in taxes and royalties last financial year.