Australia ‘uninvestable’ for new oil and gas projects if tax hike ‘folly’ proceeds, business groups claim

Heavier taxes on oil and gas producers will scupper new projects, reduce Australia’s relevance and expose it to “a more dangerous world”, business groups say, as modelling shows a $US11 billion jump in Petroleum Resource Rent Tax collections.

A snap Federal parliamentary inquiry is considering whether the sector is paying enough for the natural resources and has already heard vociferous pushback from energy giants, particularly against a proposed 25 per cent levy on LNG exports.

Ahead of the Greens-led committee holding a third day of hearings in Perth on Friday, lobby group Australian Energy Producers said the industry was already the nation’s second-largest corporate taxpayer.

They pointed to a new analysis by energy research firm Wood Mackenzie, which found the PRRT would collect $US24.5b between 2026 and 2030 at a Brent oil price of $US100/bbl, where it currently hovers.

That compares to $US13.5b at $US70/bbl, where it had been before the Middle East conflict erupted on February 28.

The Australian Tax Office says PRRT liability is levied at 40 per cent of taxable profit, with collections highly correlated to the oil price.

“Assertions that the industry is not paying its fair share, or that the tax system does not respond to higher prices, are demonstrably wrong,” AEP chief executive Samantha McCulloch said.

“Higher taxes will make Australia uninvestable for new oil and gas projects, putting our future energy security at risk.”

Chamber of Minerals and Energy WA chief executive Aaron Morey will tell the committee that the PRRT was already a windfall tax, coming on top of company tax, and had been designed to ensure the community shared in profits once projects had recovered huge upfront costs.

“This is already a heavily taxed sector,” he will say in his opening statement.

“Proposals for further tax increases risk doing real damage.

“A blunt increase, particularly something like an export levy, would cut directly across future investment decisions.

“At the margin, it will determine whether projects proceed in Australia or not at all.

“That is why we say this would be a folly of the highest order.

“If we step back from developing those resources, we reduce our relevance and expose ourselves in a more dangerous world.”

Ahead of the Federal Budget on May 12, Prime Minister Anthony Albanese would not rule a gas export tax in or out.

“What I do say, though, is that some of the arguments that have been put forward have been a bit disingenuous — and people putting them forward know that,” Mr Albanese told the ABC on Thursday.

“They, of course, will advocate for their interests.

“My interests are the interests of the Australian people.”

The tens of billions of dollars of upfront investment required before gas was extracted had to be acknowledged, Mr Albanese said.

Analysts Wood Mackenzie said Australian oil and gas projects currently had an effective tax rate of about 53.5 per cent to 57.5 per cent.

A further windfall tax could make them “uninvestable” with Brent oil at $US70/bbl, which was the long-term price that underpinned investment decisions, it said.

Climate activists claimed Wood Mackenzie’s modelling was flawed because it assumed all volumes were contracted, with none sold on the lucrative spot market.