The Government will remove the current exemption of condensate from the Crude Oil Excise. Condensate is a light crude oil extracted from natural gas.
The measure will increase the return to the Australian community from allowing private interests to extract non-renewable energy resources located in the North West Shelf project area and onshore.
Under the new arrangements, all condensate production from petroleum fields located in the North West Shelf Project area and onshore Australia will be subject to the Crude Oil Excise. This excise is levied as a percentage of the value of crude oil produced from a petroleum field.
Condensate will be subject to the same excise rates as crude oil from petroleum fields discovered after 18 September 1975. Under these arrangements, the top Crude Oil Excise rate (which applies once annual production reaches just over 5 million barrels in a year) is 30 per cent.
The first 4,767.3 megalitres (or 30 million barrels) of crude oil produced from a field is exempt from Crude Oil Excise. Past production of condensate from a petroleum field will contribute towards meeting this threshold before the Crude Oil Excise becomes payable.
As part of this measure, the Australian Government will provide the Western Australian (WA) Government with ongoing compensation for the loss of shared Offshore Petroleum Royalty revenue resulting from imposing the Crude Oil Excise on condensate. This arises because Crude Oil Excise payments are a deductible expense for calculating the Offshore Petroleum Royalty.
An initial payment of $80 million will be paid to the WA in 2007-08, with payment in subsequent years adjusted to equal the impact of removing the condensate exemption on royalty payments to Western Australia. This is estimated to cost $406.6 million over the forward estimates period.
This measure has an ongoing net revenue gain of an estimated at $2.5 billion over the forward estimates period, partly offset by an increase in net outlays of $69.6 million over the same period.
This measure takes effect from midnight (AEST) 13 May 2008.
13 May 2008