Warnings of gas "shortfalls" are industry spin, and help keep tax bills low

Australia has some of the largest gas reserves in the world, has tripled its gas production in the last 15 years, and is now one of the world’s largest gas exporters. But according to the Business Council of Australia (BCA), Australia needs new gas supply and faces ‘structural shortfalls’. Oh dear.

Meanwhile, Japan has no gas reserves but imports more gas each year from Australia than all the gas used by Australian households and industry combined (excluding gas used by the LNG industry). And yet, it is also a major gas exporter.

Indeed, last year, while Australians were being warned of our gas shortage, Japan exported more gas than all Australian households and businesses used. Maybe buying our gas back from Japan would solve our gas shortage?

Welcome to the topsy-turvy world of gas industry spin, where partial truths are mixed with faulty logic to create a layer of nonsense thick enough to hide a simple truth: Qatar, which exports about the same amount of gas as Australia, collects about six times more tax on gas exports than us.

For decades, Australians have been told by the BCA (among others), that there is no such thing as a free lunch, and that when we give things away, people don’t value them. Following this advice, Australia introduced university fees, co-payments for medicine, and tolls for public roads.

The BCA is currently pushing for a road user charge for electric vehicles on the basis that ‘users should pay’. Except for when it comes to their members having to pay us citizens for our gas.

While builders have to pay for bricks and bakers have to pay for flour, the gas export industry is trying to convince Australians that the gas industry shouldn’t have to pay for the gas they export. While you can’t blame them for trying, it’s fair to say it’s not going well.

What is more surprising is that groups like the BCA would be willing to burn so much of their credibility protecting the interests of so few of their members. Even the CEO of the Commonwealth Bank has supported the call for a new gas export tax.

The simple truth that the gas industry works hard to complicate is that while the gas industry pays a royalty for the gas it extracts ‘onshore’ to the state in which it extracts our gas, it pays no royalties at all on the gas it takes from ‘offshore’ projects which are in Commonwealth waters. Australians are literally giving ‘offshore’ gas away for free.

While it’s true that gas exporters taking our gas from Commonwealth waters are liable to pay the Petroleum Resource Rent Tax (PRRT), it’s also true that according to Treasury, “To date [May 2023], not a single LNG project has paid any PRRT and many are not expected to pay significant amounts of PRRT until the 2030s.”

Shell recently told shareholders that it expects to pay no PRRT on any of the gas it takes for its Gorgon project. And, while everyone now knows that beer excise, and HECS repayments, contribute more to the budget than the PRRT, few probably realise that the pittance we do receive from PRRT is coming from decades old oil projects in the Bass Strait, rather than the huge gas projects that spend more on PR than PRRT.

Speaking of PR, just this week the gas industry, who the ATO have described as “systemic non-payers of tax”, released ‘modelling’ to try and convince us that attempts to make them pay tax would actually hurt us Australians, not their shareholders. Indeed, their shareholders don’t even rate a mention in the long list of things their modelling tells us they are worried about.

The modelling itself actually ‘shows’ that the PRRT would, or should be, collecting more tax than a 25 percent gas export tax and, in turn, the gas industry would have us believe that if we swap the PRRT for an export tax, Australians will miss out on lots of money.

Apparently, we are expected to believe that the “systemic non-payers of tax” are worried about a new tax because, you guessed it, they are worried that Australians won’t collect enough tax off them!

Of course, the best thing about the idea of a gas export tax is that the easiest way to avoid it is for the gas industry to sell Australian gas to Australians.

While a gas export tax will collect up to $17 billion per year, it will also lead to an increase in supply of gas to Australians which will push the wholesale price of gas here in Australia down by around 25%. And cheaper gas will mean cheaper electricity.

But what about the contracts, I hear you say? What about our international reputation? Fear not.

Last year, more ‘uncontracted’ gas was exported on the spot market than all the gas used by households, industry and electricity generators in Australia. No contracts need to be broken, and old contracts are getting rewritten every week.

You can hardly blame the gas industry for wanting to hang on to the freebies that have made their profits so big and our energy prices so high.

But as for why the BCA, or even more concerningly the Australian Government, would fall for special pleading from one of the most profitable industries in the world is hard to explain. 

It’s time we made the gas export industry pay us for our gas.