Federal Government set to shelve plans for supersized gas tax amid current global energy crisis

The Federal Government is likely to knock back calls for a supersized gas tax that it believes would alienate trading partners at a time of heightened global energy volatility.

Australia’s oil and gas majors have spent the past week arguing before a Greens-led parliamentary inquiry that a windfall gas export tax of 25 per cent would stifle investment, particularly when there were already concerns about future supplies on the east coast.

Shell’s country chair Cecile Wake on Wednesday called such as proposal “spectacularly ill advised” and said it would make prospective investors view Australia as having “significantly higher sovereign risk”.

The arguments appear to have further strengthened the Government’s resolve against including the tax in next month’s Budget, with sources telling The Australian Financial Review that the plan had been shelved.

They said the US and Israel’s attack on Iran and the resultant global fuel crisis made it too difficult an environment to introduce.

It also risked irritating countries that invest heavily in Australia’s oil and gas sector — the same countries the Government had been calling on to supply more petrol and diesel before local stores run dry.

“Our focus is on fuel supplies,” one source told the AFR.

Resources Minister Madeleine King told ABC radio on Friday morning that she would not pre-empt any decisions ahead of the Budget but there was no change in the Government’s position and her current focus was on ensuring continuity of local fuel supplies.

But she noted the enormous foreign capital required to develop oil and gas projects and the communities they support.

She also took a swipe at the inquiry.

“It’s only in the universe of the Green Party and their friends that they can say that spending hundreds of billions of dollars across the country could be considered in any way free,” Ms King said.

“It’s clearly an absurd proposition, and to be frank I’m mystified by how they get away with such tosh.”

Business groups say heavier taxes on oil and gas producers would scupper new projects, reduce Australia’s relevance and expose it to “a more dangerous world” as modelling shows a $US11 billion jump in Petroleum Resource Rent Tax collections.

Ahead of the Greens-led committee holding a third day of hearings in Perth on Friday, lobby group Australian Energy Producers said the industry was already the nation’s second-largest corporate taxpayer.

They pointed to a new analysis by energy research firm Wood Mackenzie, which found the Petroleum Resource Rent Tax would collect $US24.5 billion between 2026 and 2030 at a Brent oil price of $US100 a barrel, where it currently hovers.

That compares to $US13.5b at $US70/b, where it had been before the Middle East conflict erupted on February 28.