Shining the spotlight on the petroleum resource rent tax

2018 ◽  
Vol 58 (2) ◽  
pp. 643
Author(s):  
Kenneth Wee
Keyword(s):  
Oil And Gas ◽  
Petroleum Exploration ◽  
Consultation Process ◽  
Resource Rent ◽  
Petroleum Resource ◽  
Petroleum Resources ◽  
Recent Developments ◽  
Pros And Cons ◽  
Policy Direction ◽  
Resource Taxation

The petroleum resource rent tax (PRRT), a 40% profits-based upstream tax that applies to Australian oil and gas projects, has come under significant scrutiny as to its effectiveness in providing an appropriate return to the community for the exploitation of Australia’s petroleum resources. The April 2017 independent Callaghan review into the design and operation of the PRRT found that it remained the preferred way of achieving a fair return to the community from petroleum exploration and recovery, without discouraging investment into the sector. However, the Callaghan review recommended possible changes to the regime to improve its sustainability and compatibility with the current state of the industry, while ensuring fiscal stability for existing investments. In response to the findings and recommendations of the Callaghan review, Australian Treasury embarked on a consultation process to investigate potential reform options to the PRRT. Government has yet to announce its decision on the way forward. What the future holds for the PRRT and the consequential impact on existing and new or proposed projects remain to be seen pending the Government’s chosen policy direction. This paper covers the following: • a survey of the economic rent theory underpinning the framework of the PRRT regime, including its pros and cons compared with other forms of resource taxation • a review of key recent developments in the administration and interpretation of the PRRT law, and • how the PRRT regime is anticipated to change and the associated repercussions on the after-tax economics and practical compliance for existing and future projects.

Contemporary fiscal issues impacting M&A in the oil and gas sector

2012 ◽  
Vol 52 (1) ◽  
pp. 149
Author(s):  
Kenneth Wee
Keyword(s):  
Oil And Gas ◽  
Oil And Gas Industry ◽  
Regular Feature ◽  
Gas Industry ◽  
Resource Rent ◽  
Petroleum Resource ◽  
Recent Developments ◽  
Australian Economy ◽  
To Come ◽  
Oil And Gas Sector

Ongoing growth in deal activity in the oil and gas industry is one of the critical forces underpinning the sustained robustness of the Australian economy. Australian oil and gas assets continue to attract significant international interest and are actively pursued by global and domestic investors alike. On the supply side, exploration players are seeking the necessary funding and technical support to commercialise prospective oil and gas discoveries, while on the demand side, major established oil and gas companies are seeking to acquire viable targets as a means of rapidly replenishing their reserves. Consequently, merger and acquisition (M&A) deals and asset trades have become a regular feature of the corporate oil and gas scene in Australia. In time to come, a wave of industry consolidation is likely to emerge. This paper discusses key fiscal aspects of M&A transactions, as affected by recent developments in the Australian taxation landscape, and their impact on the overall economics of, and extracting value from, an investment in the oil and gas sector, including: the taxation of farm-in/farm-out arrangements, asset swaps and carry arrangements; structuring the deal consideration for fiscal efficiency; takeover and acquisition vehicle structures; the M&A issues associated with the extension of the Petroleum Resource Rent Tax (PRRT) to the onshore oil and gas industry; consideration associated with capital management, capital structure and financing trends for the industry; exit and repatriation routes—do all roads lead to tax?; managing transaction costs; and, managing tax risks in M&A deals.

Petroleum Resource Rent Tax: an update on recent developments

2012 ◽  
Vol 52 (2) ◽  
pp. 654
Author(s):  
Ian Crisp
Keyword(s):  
Oil And Gas ◽  
Due Diligence ◽  
Resource Rent ◽  
North West ◽  
The Past ◽  
The North ◽  
Petroleum Resource ◽  
Recent Developments ◽  
Key Issues ◽  
Oil And Gas Companies

Although the Petroleum Resource Rent Tax (PRRT) has been operating for longer than 20 years, the past few years have seen a significant amount of activity on this front: The announcement by the Australian government, on 2 July 2010, to expand the existing PRRTto include onshore oil and gas projects, including coal seam gas projects and the North West Shelf Project. The release of three ATO draft taxation rulings in 2010 about the pre-conditions for the deductibility of project expenditure, excluded expenditure (including indirect administration expenses) and the treatment of expenditure paid under ’sub-contractor’ arrangements. The courts’ decisions about the treatment of contract payments and the application of the PRRT taxing point. This extended abstract explores these developments as they apply to existing and new PRRT taxpayers, and identify the key issues that oil and gas companies will need to be aware of as they continue or commence compliance with the PRRT. This extended abstract also explores the impacts of these developments on transaction structuring, due diligence, financial modelling and fiscal certainty in the broader context of asset portfolios.

Australian States and Northern Territory acreage update at APPEA 2010

2010 ◽  
Vol 50 (1) ◽  
pp. 35
Author(s):  
Peter Green
Keyword(s):  
Oil And Gas ◽  
Petroleum Industry ◽  
Northern Territory ◽  
Petroleum Exploration ◽  
Tight Gas ◽  
Extensive Experience ◽  
Green Is ◽  
Australian State ◽  
Petroleum Resources ◽  
Exploration And Production

Peter Green is the Geoscience Manager: Energy Geoscience in the Geological Survey Queensland and has extensive experience in basin studies, geoscience and the development of petroleum regulation in Queensland. This paper provides a summary of the land releases for petroleum exploration for onshore areas and coastal waters of Australia for 2010. The summaries include upstream petroleum acreage opportunities for the states and the Northern Territory, and geothermal energy exploration opportunities. The rise in interest in export liquefied natural gas projects has ensured petroleum exploration and production has remained strong. Interest in acquiring petroleum acreage to explore for both conventional and non-conventional plays remains high. Australian state and the Northern Territory governments continue to provide access to land and promotional opportunities for companies to undertake exploration and development of our petroleum resources. Acreage on offer provides a mix of exploration opportunities from conventional oil and gas through to the unconventional plays such as shale gas and tight gas. This change in acreage on offer reflects the changing nature of the onshore petroleum industry in Australia.

Getting the message across—taxation contribution of the petroleum industry in Australia

2015 ◽  
Vol 55 (2) ◽  
pp. 432
Author(s):  
Carlo Franchina ◽  
Rod Henderson ◽  
Praneel Nand
Keyword(s):  
Common Ground ◽  
Oil And Gas ◽  
Petroleum Industry ◽  
Oecd Country ◽  
Life Cycles ◽  
Income Taxes ◽  
Resource Rent ◽  
Petroleum Resource ◽  
The Common ◽  
Oil And Gas Companies

With the global move towards tax transparency reporting measures, resource companies face challenges in ensuring that reporting captures the full extent of revenues contributed by resource companies and also correctly reports the project and profitability life cycles of resource companies. This extended abstract focuses on the global tax transparency debate and highlights the challenges for large Australian and global oil and gas businesses in demonstrating their payment of their fair share of tax and contributing to the communities in which they operate. Issues to be covered include: A summary of the revenue contribution of oil and gas companies in Australia through the layers of taxation, such as state royalties, the Petroleum Resource Rent Tax (PRRT) and corporate income taxes. Highlighting the types and rates of taxes paid by Australian oil and gas companies compared to other selected countries. A comparison of the concessions granted to Australian oil and gas companies to other countries. A historical summary of taxes paid by Australian oil and gas companies. A summary of existing and developing transparency reporting, such as the Australian Taxation Office (ATO) reporting of taxpayers with revenues more than A$100 million, the Extractive Industries Transparency Initiative, Dodd Frank rules, OECD country-by-country reporting, and BEPS developments. Recommendations to get the message across; that is, what should be the common ground on reporting the actual overall global tax liability including income tax, resource taxes, employment taxes and indirect taxes.

Tax issues impacting acquisitions in the Australian oil and gas industry

2011 ◽  
Vol 51 (2) ◽  
pp. 669
Author(s):  
Chad Dixon
Keyword(s):  
Income Tax ◽  
Oil And Gas ◽  
Investment Decision ◽  
Oil And Gas Industry ◽  
Capital Gains ◽  
Capital Gains Tax ◽  
Gas Industry ◽  
Resource Rent ◽  
Goods And Services ◽  
Petroleum Resource

Understanding the tax implications and structuring options of a transaction is critical when assessing and comparing new opportunities. When undertaking any transaction involving Australian oil and gas assets, the applicable taxation regime should be carefully explored and understood. From an Australian perspective, taxes such as corporate income tax, petroleum resource rent tax, capital gains tax, and goods and services tax have significant potential to influence the investment decision. This presentation will focus on the tax implications applicable to the acquisition and disposal of Australian oil and gas assets, providing valuable insights for both Australian companies and inbound investors.

Unitisation of petroleum project interests

2015 ◽  
Vol 55 (2) ◽  
pp. 497
Author(s):  
Wee Kenneth
Keyword(s):  
Oil And Gas ◽  
Development Project ◽  
Capital Gains ◽  
Capital Gains Tax ◽  
Resource Base ◽  
Resource Rent ◽  
Petroleum Resource ◽  
Key Issues ◽  
The Impact ◽  
Fiscal Implications

Traditionally, the unitisation of oil and gas project interests involved the exchange of legal ownership interests between project proponents to achieve uniformity of their licence interests across the project. Recently, more contemporary and creative forms of unitisation have emerged including economic, beneficial and contractual unitisation approaches that do not necessarily involve the transfer of legal title interests. Unitisation is a way of pooling resources to improve the likelihood of an economically viable project for participants and to overcome practical challenges resulting from uneven interests in the component parts of a broader project. In some cases, unitisation is the catalyst for project sanction. Achieving agreement and alignment on the most equitable unitisation outcome, including the valuation of the relative resource base and ownership stakes, is not easy. It involves navigating a myriad of legal, commercial, operational and financial considerations. A project residing in both federal and state waters can add increasing layers of complexity due to the interaction between overlapping federal and state jurisdictional and taxing rights. This extended abstract discusses key issues arising in various unitisation models and considers the associated fiscal implications from income tax, capital gains tax, petroleum resource rent tax and royalty perspectives. It also examines the government’s announced tax measures for dealing with the swapping of interests or interest realignments resulting in a common development project and the impact and effectiveness of these rules on unitisation arrangements.

The petroleum resource rent tax (PRRT) and the economics of an oil and gas project

2014 ◽  
Vol 54 (2) ◽  
pp. 515
Author(s):  
Carlo Franchina ◽  
Ben Opie
Keyword(s):  
Oil And Gas ◽  
Due Diligence ◽  
Critical Importance ◽  
Resource Rent ◽  
Contract Negotiation ◽  
Petroleum Resource ◽  
Key Drivers

When thinking about the key drivers of project value, the PRRT profile of a petroleum project may not be top of mind for non-tax teams. As a 40% tax on the upstream activities of a petroleum project, however, the PRRT can significantly impact on project NPV and non-tax teams can play an important role in optimising the PRRT profile of a project. For finance and legal teams, this may be as part of the due diligence, modelling, and contract negotiation phase of acquiring or disposing of an interest in a project. Operational and technical teams can play an important role in helping tax teams to understand a project so that they can apply tax technical concepts; for example, in determining the characterisation of expenditure. Properly substantiating PRRT expenditure is also of critical importance; finance, IT, commercial, and operational teams should be involved in developing systems that capture the information tax teams require to be able to quantify and evidence PRRT deductions. This extended abstract focuses on the practical ways in which non-tax teams can help optimise the PRRT profile and, in turn, the NPV of a petroleum project.

Decommissioning and rehabilitation: funding models

2021 ◽  
Vol 61 (2) ◽  
pp. 526
Author(s):  
Kenneth Wee
Keyword(s):  
Oil And Gas ◽  
Policy Design ◽  
The State ◽  
Alternative Funding ◽  
Funding Model ◽  
Private Sector Investment ◽  
Petroleum Resource ◽  
The Status ◽  
Pros And Cons ◽  
The Government

Decommissioning oil and gas facilities and rehabilitating a petroleum operation area involve complex, lengthy and costly processes. Funding the liability for the decommissioning and rehabilitation phase of a petroleum project is determined by the juxtaposition of a matrix of three fundamental and closely interdependent policy decisions on: whose obligation it is (the proponent, the state or both) to carry out decommissioning, whose liability it is (the proponent, the state or both) to pay for decommissioning and which decommissioning funding model is appropriate for the proponent and/or the government (if there is state participation). Proponent models may include funding with or without security or contributions to a decommissioning fund. Government funding models are inextricably linked with the imposition, collection and appropriation of the fiscal take applying to the oil and gas sector. There are therefore many variants in the responses to, and stance taken, on the above policy issues. It is, however, universally accepted that the state should not be inadvertently left with the ultimate obligation and/or the liability for decommissioning and rehabilitation. The preferred policy choice involves finely balancing the interests of the state without disincentivising private sector investment in the development of the petroleum resource. This study will review the pros and cons of the main alternative funding models typically used internationally, the status of Australia’s decommissioning funding and associated fiscal policies, whether and to what extent the Australian government participates in the funding of decommissioning and rehabilitation undertakings and proposed improvements to the policy design settings.

Capital Accumulation, Environmental Pollution, and Public Health Challenges in the Nigerian Petroleum Industry: Lessons on Market Criminology

2020 ◽  
Vol 19 (1-2) ◽  
pp. 181-200
Author(s):  
Ifeanyi Ezeonu
Keyword(s):  
Public Health ◽  
Capital Accumulation ◽  
Oil And Gas ◽  
Petroleum Industry ◽  
Gas Production ◽  
Petroleum Exploration ◽  
Oil And Gas Production ◽  
Petroleum Resources ◽  
Public Health Challenges ◽  
Expansive Process

Abstract Petroleum exploration activities started in Nigeria’s Niger Delta in the early twentieth century as part of the expansive process of primitive accumulation instituted by the British colonial administration to advance its economic interest. Since petroleum resources were discovered in commercial quantities in the region in 1956, transnational extraction corporations (including Shell, Chevron, and ExxonMobil) in collaboration with the emergent domestic compradors have plundered the resource wealth. While decades of crude oil and gas production in the region have enormously enriched the captors of the petroleum industry, the host communities have suffered debilitating economic and health consequences. This article discusses the public health challenges resulting from this predatory political economy, along the lines of a bourgeoning body of literature that conceptualizes preventable market-driven harms as criminal.

2015 Offshore Petroleum Exploration Acreage Release

2015 ◽  
Vol 55 (1) ◽  
pp. 67
Author(s):  
Demus King
Keyword(s):  
Oil And Gas ◽  
Petroleum Exploration ◽  
Regulatory Regime ◽  
Good Standing ◽  
Challenges And Opportunities ◽  
Petroleum Resources ◽  
Australian Economy ◽  
Under Construction ◽  
High Level ◽  
Offshore Petroleum

The oil and gas sector is a key contributor to the Australian economy, contributing $30.8 billion in commodity export earnings in 2013–14 (Department of Industry and Science, 2015). Underpinning future growth in the value of oil and gas to the Australian economy is the almost $200 billion of investment in seven LNG projects under construction. Australia relies on foreign capital to continue to explore for, and develop, its natural resources. New challenges and opportunities are arising for the sector. Increased international competition, advancing technology, and increasing risks and volatile costs associated with the development of fields are features of the current offshore operating environment. Australia’s legislative and policy settings must be sufficiently robust and flexible to support the continued development of Australia’s offshore resources into the future. To this end, the Australian Government is undertaking a high-level strategic review of the resource management framework for offshore petroleum resources in Commonwealth waters. The review will test the robustness of the policy, legal and regulatory regime to ensure the framework remains flexible enough to keep pace with the evolving environment and continues to attract investment. The annual Offshore Petroleum Exploration Acreage Release facilitates new investment in offshore petroleum exploration. The 2015 Acreage Release is accompanied by an updated exploration guideline. The guideline increases flexibility in permit management and clarifies competitive work program bidding expectations and good standing as well as providing more flexibility in the way good standing agreements may be discharged. This will enable industry to undertake exploration with increased autonomy and reduce the administrative burden. It accommodates changing technological capacity and encourages increased exploration in Australia’s offshore waters.

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