Companies in north-west Western Australia may have wrongly claimed billions of dollars in tax deductions, says report

This article is more than 3 years old

This article is more than 3 years old

Oil and gas companies operating in Australia may have wrongly claimed billions of dollars in tax deductions in recent years, leaving governments underpaid millions of dollars in royalties.



The Australian National Audit Office has released a report, Collection of North West Shelf Royalty Revenue, which finds “significant shortcomings” in the framework for calculating royalties levied on off-shore petroleum operations from the north west shelf (NWS) off Western Australia.

The NWS project accounts for over a third of Australia’s oil and gas production.

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It is a joint venture between seven major international companies including Woodside Energy, BHP Billiton Petroleum, and Chevron Australia.

The ANAO report found the administrative arrangements for royalty payments from the NWS project were so bad that it was impossible to know how accurate the royalties calculations had been.

It said the consolidated royalty schedule, which governs how royalties are calculated, had not been updated in the last 10 years. It also said oil and gas companies had been claiming deductions for things that were not permitted.

“On this basis, the ANAO has doubts about the eligibility of deductions claimed for the cost of debt and equity funded capital, excise paid on crude oil and excise paid on condensate,” the report warns. “There has been limited scrutiny of the claimed deductions.

“Some errors in the claiming of deductions have been identified, but the available evidence indicates that the problems are much greater than has yet been quantified.”

The report said the Western Australian government had commissioned consultants to investigate some deductions claimed by oil and gas companies, and they found $8.6m in underpaid royalties to date.

It said that investigation provided valuable information but a comprehensive review of claimed deductions had not been commissioned.

“The full extent of any errors in the calculation and payment of royalties has been been quantified,” the report said, adding that “significant effort” was required to resolve the status of another $281.4m in operating expenditure deductions and $21.1m in capital expenditure deductions.

The report said more than $5bn worth of deductions were claimed against petroleum revenues in the 18 months to December 2015. It said revenue reported by producers from NWS petroleum sales in the same period was $19.7bn.

From this, $1.9bn in royalties was collected. The Australian government retained $600m (32.3%) and the remaining $1.3bn (67.7%) was paid to Western Australia.

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The NWS project is a joint venture project between seven major international companies:

Woodside Energy Pty Ltd (the NWS project operator)



BP Development Australia Pty Ltd



BHP Billiton Petroleum (North West Shelf) Pty Ltd



Chevron Australia Pty Ltd



CNOOC NWS Private Limited



Japan Australia LNG (MIMI) Pty Ltd



Shell Development (Australia) Pty Ltd

Woodside Energy has been approached for comment.