Article by: Hari Yellina
Are you upset by the abrupt and huge increase in the price of gas in Australia? You ought to be. Not only is it directly affecting household budgets and increasing costs for local businesses, but it is also a key contributor to the recent increase in electricity prices. Ordinarily, knowing that our hard-earned money was going to a good home, where it was at least being utilised to build a future for the next generation, would provide some comfort. That could very well be the case. Unfortunately, that home is not in this location. Because Australia’s oil and gas resources are disproportionately exploited by multinational corporations, the majority of the windfall riches currently being earned — courtesy of Vladimir Putin’s invasion of Ukraine — are being funnelled out of the country.
In truth, there isn’t much in the way of local equity. According to a new analysis by The Australia Institute, Australians hold only 4.3 percent of the enterprises that produce and process natural gas across the country, from the North-West Shelf to Bass Strait and north Queensland. Given the enormous sums of money required to extract, process, and export oil and gas, you’d think that the huge energy conglomerates would be at the forefront of building these massive projects. The tragedy is that not only is there little Australian ownership — meaning most of the dividends go offshore — but most of these firms also don’t pay any taxes.
The vast majority have never paid any taxes and, in some cases, have stated that they will never do so. Despite promising billions of dollars in tax and royalty revenues while seeking regulatory approval, they have been able to extract vast profits while contributing almost nothing to the nation in recent years thanks to a combination of accommodative tax regimes on our part and tax avoidance strategies. We’ve had a specific tax on oil and gas firms called the Petroleum Resources Rent Tax for more than 30 years. It was similar to the Mining Tax, though in a much older form. The tax is only in effect during the production phase and is intended to capture a portion of the revenues from significant projects.
Despite the recent price increase, it is expected to collect only $2.4 billion this year, a $1 billion increase over last December’s prediction but still below levels seen around the turn of the century. Chevron and other major oil and gas companies, predictably, have argued that things should stay the same. In a 2017 statement to the federal government, the business stated, “The PRRT is performing as designed.” “It has aided huge investments by Chevron and others in Australia, and it has the potential to underpin a new wave of oil and gas investment.” That could be the case. However, Chevron’s most recent financial statements show that it paid no tax under the regime between 2015 and 2020.
While there are a few domestic enterprises that play major roles in the gas industry, this has done little to reduce foreign control. That’s because companies like Woodside, Santos, and Origin are all publicly traded companies that attract significant foreign investment. According to a study issued today by The Australia Institute, Woodside is 82.2 percent foreign owned and Santos is 71.1 percent. Three of the ten main LNG projects, including the largest, Gorgon, were entirely owned by foreign companies. Seven of the ten were more than 90% foreign-owned, while the three Queensland-based enterprises that have caused so much controversy over the last five years vary from 89 percent to 100 percent foreign-owned.
Origin Energy projected a fortnight ago that the increase in gas prices would add $300 million to its 27.5 percent stake’s revenues this year. That adds out to an extra $1.1 billion for that one project. It’s possible that the other two are reaping comparable windfall profits, with some of it coming from east coast businesses and households that pay their fair share of Australian taxes. Two decades ago, then-treasurer Peter Costello vetoed Shell from buying Woodside, claiming that a foreign acquisition of the North-West Shelf would be detrimental to the country’s interests. Regardless, it has occurred.