Our Economic Contribution
As Australia’s leading LNG producer, we are proud of our contribution to the community and to the nation. This includes, but is certainly not limited to, a significant financial contribution. We pay taxes in Australia – $6 billion over the past five years – and also support communities through direct funding.
We pay our way. Indeed, Woodside calculates that for large, economic projects in Australia, the government can expect to receive around 70% of the total value generated over the project’s life cycle. This means the government is already set to receive the majority of the benefits from a project, even though investors take all the risk.
Back in the 1980s, the federal government put in place a regime that recognised that the high capital costs of oil and gas projects in Australia could impede their development. They designed a tax regime that would allow for projects to be developed and ensure that producers would pay their fair share once projects become profitable and costs are recouped. Successive governments have supported the principle that producers should pay more tax when they generate lots of revenue and less when revenue generation is low because oil and gas prices are low.
These arrangements have facilitated more than $200 billion of investment, allowing Australia to emerge as a global leader in LNG production right at a time of growing global demand for low-emissions, reliable energy.
Woodside believes that Australia’s tax regime, including corporate taxes and the Petroleum Resource Rent Tax, ensure that the Australian people receive a fair return on their resources by allowing for projects to be developed, jobs created and taxes paid.
Our PRRT Position
Fiscal changes are being proposed at a time when commodity prices are at an all-time low and immediately following a time of significant industry investment. Any retrospective adjustment will not only undermine those good faith investments previously made for existing projects and reduce the ability to invest in the near term in any expansion plans, but will also significantly reduce the confidence to manage future investments.
Woodside urges the PRRT Review team to respect the basis on which existing investments were made and reject reform that applies retrospective changes. Changes to the fiscal regime as a result of the PRRT Review risks creating fiscal uncertainty and sovereign risk.
Woodside is an Australian-headquartered oil and gas company with approximately 3,500 employees and three major potential Australian LNG projects (Browse, Sunrise and Scarborough) in its portfolio.
With more than 210,000 individual investors in Australia and 80 per cent of our dividends being paid out in Australian dollars, the majority of wealth Woodside generated from our projects stays in Australia.
Woodside is a significant taxpayer in Australia, with A$6 billion paid in corporate taxes over the past 5 years, inclusive of PRRT. Since 2001, we have paid $2 billion in PRRT alone.
The PRRT was put in place as a preferred means of petroleum taxation as the previous fiscal framework, largely based on royalties, was found to be hindering exploration, project development and continuing production in marginal projects. The design of the PRRT was deliberate to ensure a return to the community for above normal profits derived from natural resources (the ‘resource rent’) while aiming to minimise distortion of investment decisions. This regime has supported the development of marginal projects which, under a more onerous fiscal setting, would likely not have been developed.
Woodside is of the strong view that the PRRT continues to work as originally intended. The current Australian fiscal regime, including PRRT, has successfully underwritten massive investments in Australia by Woodside and the Australian oil and gas industry. These investments will provide benefits to the Australian community, including through PRRT contributions, for decades to come.
As a profits-based tax, it is not unusual to have declining PRRT take at a time of declining oil and gas prices and prior to these projects recouping their costs. The benefits from such projects must be measured over their full life cycle and not adversely judged during periods of commodity price downturn. Based on full project life cycle economics, it is important to acknowledge that the Australian Government take is typically 70% or more of the total project value, which the government receives without taking the investment risk.
Any material changes to the existing PRRT framework risks creating additional barriers to investment and significantly reducing the competitiveness of the Australian oil and gas industry.
Woodside has a strong interest in continuing to pursue opportunities in Australia and delivering significant benefits to the Government and community, however risks of fiscal uncertainty cannot be ignored.
The Woodside operated North West Shelf (NWS) Project has carried a significant taxation burden since the project commenced, paying in excess of A$26 billion of royalties and excise, strongly benefiting the Australian community. Any changes imposed on the NWS Project raise concerns of fiscal and regulatory certainty and put any future activities at risk, including the development of the remaining fields within the NWS Project area, which would be affected by uncertainty or additional tax burden. Any changes would possibly impact the attractiveness of utilisation of existing infrastructure for other resource owners, which may otherwise allow for the optimal commercialisation of stranded hydrocarbons. Any changes to the current fiscal settings that impact the NWS Project has the potential to negatively impact on the Australian economy and future regional jobs related to the project.