Our fossil-fuelled world

It’s the tip of the spear of a campaign that has been run for some years now.

Campaigners say Australia is giving its gas away to multinationals who do not pay royalties or Australian tax. It is boosted by a claim that the Commonwealth government subsidises the fossil fuel industry to the tune of $14.5 billion.

These claims have been advanced most strenuously by institutions and embraced by people on both the left and the right. For example, Clive Palmer has been running strip ads on the bottom of a mainstream newspaper calling for a 25 per cent export tax on gas.

It is our view that this is assertion is not accurate.

All companies that extract gas either pay royalties if they are in a state’s jurisdiction, or the Petroleum Resource Rental Tax (PRRT), if they are in the Commonwealth’s, with the exception of the 50-year-old North-West Shelf development which pays royalties to the Commonwealth.

Last year Queensland received $1.7 billion in petroleum royalties most of which is from gas converted into liquefied natural gas. In 23-24 the Commonwealth received $1.5 billion in PRRT.

When the gas companies make profits they also pay company tax. Woodside, for example, paid $1.7 billion tax in 23-24. Shell paid $990 million, Chevron $3.5 billion.

In total, foreign gas companies paid $7.5 billion in company tax on $26 billion of profit.

As for subsidies, the Productivity Commission calculates these to amount to only $446 million for the entire mining industry, not just fossil fuels, 3 per cent of the exaggerated claim.

There is also a framing that because Norway has a different tax system and appears to reap more from their gas, then we should copy Norway. Norway’s gas is cheaper to extract, so there is more profit to play with. The Norwegian government is also the owner of 49 per cent of the oil production, so they get 100 per cent of half before taxing the other half.

They also subsidise oil companies. If a company drills a well that doesn’t hit oil or gas the government returns them 78 per cent of the cost.

The real measure of whether we are getting ripped-off is whether the return on Aussie gas projects is better or worse than those overseas. The answer to that is that our projects give a return on invested cash (ROIC) in the range of 5-8 per cent, depending on the project. Norway is 6-10 per cent. So, on an apples-to-apples comparison, despite a higher tax rate, Norwegian miners do better.