Why does half of Australia’s natural gas attract no royalties, costing us billions?

A failure to impose royalties on more than half of Australia’s exported gas is costing the public purse billions of dollars, independent think tank research shows.

May 30, 2024, updated May 30, 2024
More than half of the natural gas exported from Australia attracts no royalties at all, costing the country billions (Pic: REUTERS/Raquel Cunha)

More than half of the natural gas exported from Australia attracts no royalties at all, costing the country billions (Pic: REUTERS/Raquel Cunha)

The Australia Institute report showed six of the 10 facilities that export liquefied natural gas, which is methane gas that’s liquefied for shipping, were not paying royalties to state or federal governments.

Charging royalties on the remaining gas could have raised an extra $13.3 billion in revenue over four years, which the report’s author said could have been funnelled into public services such as healthcare and education.

“Many Australians will be shocked to realise that a large portion of the nation’s gas is given away, essentially for free,” co-author and principal advisor at the progressive think tank Mark Ogge said.

The federal government has moved to cement a place for gas as “an important source of energy through to 2050 and beyond” in its future gas strategy, unveiled in May.

Royalties are effectively the purchase price of a natural resource paid by miners to compensate communities for their depletion.

They are paid to the Queensland government for three gas projects in that state as well as to the Commonwealth government and the Western Australian government via Woodside’s Karratha Gas Plant under a framework set up back in the 1970s.

That leaves another six, all of which extract gas from offshore fields in Commonwealth waters and are the responsibility of the federal government.

The industry is subject to taxes – which are distinct from royalties – including income tax and the petroleum resource rent tax levied on profits.

Mr Ogge said the oil and gas companies should be paying royalties as well as taxes on profits and a failure to do so consistently meant Australians were missing out on a fair return on their resources.

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Other countries, such as Norway and Qatar, were extracting far greater returns from their natural resources, with the latter producing only 50 per cent more coal and gas than Australia but taking in six times more government revenue.

“Australia needs urgent reform to the tax and royalty system for resources to end this obscene giveaway,” My Ogge said.

The think tank called for royalties to be applied to all gas produced in the country as well as an inquiry into “mismanagement” of the resource.

The total value of LNG exports over the past four years is about $265 billion.

Exports of royalty-free gas were thought to be valued at about $149 billion, much of which was produced in Western Australia.

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