Condensate, a light oil produced in association with natural gas, was in 1977 made exempt from the Crude Oil Excise so as to facilitate “sunrise industry” investment in the North West Shelf Gas Project and in the Cooper Basin.
The Treasurer, the Hon Wayne Swan MP, has announced Budget measures to remove this industry start-up concession 24 years after the project’s commencement.
The concession has been of great benefit to the North West Shelf Gas Project and over the past five years alone, it has been worth almost $1.5 billion at oil prices about half current levels.
Now that the project is mature and profitable with record high oil prices, the concession is no longer justified and it is time to ensure the Australian community receives a fairer share of the benefits associated with resource exploitation in the North West Shelf Gas Project area.
Minister for Resources and Energy, the Hon Martin Ferguson AM MP said: "Tonight's Budget includes measures to expand the application of the Crude Oil Excise to condensate produced in association with natural gas.
“At today’s record oil prices, the condensate excise exemption has been generating windfall profits for the North West Shelf Gas Project in recent years.
"Clearly, this project is now mature, profitable, and no longer reliant on investment incentives for its ongoing health.
"Meanwhile, new gas projects such as Gorgon, Browse, and Sunrise are struggling to get off the ground and it is therefore time to reassess and even up the playing field for investment.
"The Treasurer this week announced a comprehensive review of the taxation system and this review will include an assessment of the barriers to investment in large-scale downstream gas processing projects in Australia, the particular hurdles faced by remote gas developers, and consideration of the future policy framework for new sunrise industry investment in Australia’s gas sector, including new LNG, Gas-to-Liquids, and domestic gas projects.
"The challenges of providing a stable and internationally competitive investment framework to underpin the long-term development of more of Australia’s gas resources for the benefit of all Australians will be considered by the taxation review.
"The North West Shelf Gas Project participants will continue to benefit from the 2001 reduction in the top rate of crude oil excise. This concession has already delivered around $1 billion in benefits and is far more generous than was originally intended by the Government or expected by the companies. The higher than expected value of this concession will significantly offset the impact of the expansion of the Crude Oil Excise to condensate produced in association with natural gas.
“Other gas projects in Commonwealth offshore areas are unaffected by this measure and will continue to be covered by the Petroleum Resource Rent Tax (PRRT) regime.
“I will continue to work with the Australian Petroleum Production and Exploration Association, on behalf of its members, for the long-term health and well-being of Australia’s oil and gas sector.”
Media contact: Michael Bradley – 0420 371 744