Factcheck: BP is right, a 25% gas export tax "would significantly increase total government revenue"

The claim:

In its submission to the Senate Select Committee on the Taxation of Gas Resources, BP Australia wrote:

“The introduction of additional taxes such as a 25% tax on LNG revenues in addition to the existing regime would significantly increase total Government revenue.”

The facts:

The claim is true! BP have uncovered that a tax on gas exports would raise more revenue than the Petroleum Resource Rent Tax (PRRT).

To be fair, this is not a huge secret, given we have been making this claim in multiple research papers, news articles, podcasts, webinars, public events, petitions and adverts (!)

But yes, they are correct (well done! It’s not often the gas industry is so accurate when it comes to tax).

A 25% tax on gas exports could raise up to $17 billion per year. That is more than enough to cover the cost of placing dental in Medicare, or to provide free tertiary education and TAFE, or for free childcare.

Had the Albanese government brought in such a tax upon coming to power in 2022 it would have raised $63.8bn by December last year (and counting) compared to the measly $5.6bn raised by the PRRT.

The problem with the PRRT is that it has failed to keep up with the ever-changing gas industry. No longer is it just about oil and gas in the Bass Strait. About eighty per cent of Australia’s gas is now converted into LNG and exported. But as Australia’s gas exports have grown, the PRRT’s revenue has failed to rise accordingly:

So, well done BP on admitting that a 25% tax on gas exports would raise more revenue. You got us!

However, other claims are misleading…

Unfortunately, this short excerpt of truth is surrounded by uncited claims from BP that don’t stack up.

The claim:

BP also wrote that a 25% tax on gas exports “would also reduce returns to well below hurdle rates and likely make future gas projects for BP uneconomic”

The facts:

The claim is false: A gas export tax would not make future gas projects “uneconomic”.

First: Existing projects will be fine, world gas prices are significantly higher today than they were back when many of Australia’s biggest gas projects were commenced, so the idea that our gas industry would not be viable if they had to pay a 25% tax is demonstrably untrue.

Second: Many future projects will also be fine (unfortunately), the gas industry is one of the most profitable industries in the world, precisely because the prices it receives are so much higher than their costs of production.

Third: Even if it were to deter investment, this would actually be a good thing, particularly for the climate. Currently, Australia has 45 oil and gas projects in development, contrary to calls from the International Energy Agency (IEA), the United Nations, and scientists for an end to new fossil fuel development. For Australia and the world to escape the worst of climate change, that means no new fossil fuel projects.

The claim:

BP also wrote in its submission that a 25% tax on gas exports would mean “incremental Government revenue would never be realised.”

The facts:

The claim is false: This is nonsense.

A gas export tax would be realised almost immediately, as companies are currently exporting Australian gas and earning revenue from these sales. If they became immediately liable to pay an export tax, they would continue exporting large quantities of gas and paying a considerable amount of this tax.