Australia reiterated that it’s prepared to negotiate some aspects of a proposed 40 percent tax on resource project profits that’s prompted companies including BHP Billiton Ltd. to review investment plans.
“There is room for negotiation about the finer detail,” Resources and Energy Minister Martin Ferguson said today at a petroleum conference in Brisbane. “This is a genuine consultation process, we are listening.”
BHP Billiton, the world’s largest mining company, and Rio Tinto Group said they would review Australian projects after the government announced the tax plan May 2. Santos Ltd. and Origin Energy Ltd. have said they may delay investment decisions on their planned liquefied natural gas ventures in Queensland.
“Any reform proposal must only apply to new investments, not to existing investments,” BHP Chairman Jac Nasser said today in a letter to shareholders. The company plans to hold information sessions with its Australian shareholders, he said.
Returns from the ventures exceeding the rate on long-term Australian government bonds, currently at less than 6 percent, would be taxed as “super profits” under the proposal. Stephen Robertson, Queensland minister for natural resources, said the rate is “far too low” and that the tax should “kick in” after 11 percent.
“This is not the best time to put a new tax on the table,” he told reporters at the conference. Robertson said he is concerned the tax may delay the state’s LNG developments.
Companies developing coal-seam gas-to-LNG projects in Queensland “were the first people in the door” after the tax plan was unveiled by the government, Ferguson said. Discussions with companies about the tax are continuing, he said.
“This is a matter we’d like to wrap up as soon as possible,” Ferguson told reporters after his speech.
Treasurer Wayne Swan declined to comment on whether the government would be prepared to lower the proposed 40 percent rate.
“The government outlined very clearly when the package was produced over a week ago that we were very much in the cart to discuss generous transitional provisions for existing projects,” Swan told reporters in Perth today. “I am also willing to listen to what people have got to say, but in terms of the framework that we outlined when we announced the tax, that’s the framework that we are working within.”
The new tax laws will be enforced for existing projects, not just new ones, Swan said.
Ferguson identified the tax measure and oil spills off Australia and in the Gulf of Mexico as the “elephants in the room” as executives from oil and gas companies met in the Queensland capital for the Australian Petroleum Production and Exploration Association conference.
“It will take a long time to rebuild confidence in the industry” after the Montara oil spill in the Timor Sea, Ferguson said. The oil leaking from a BP Plc well in the Gulf of Mexico since April 20 “has served to deepen this crisis of confidence,” he said.
An inquiry into the Montara spill is due to report its findings in mid-June, he said. PTT Exploration & Production Pcl has estimated that as much as 400 barrels a day of oil may have leaked from the Montara field off Australia’s northwestern coast between Aug. 21 and Nov. 3, which totals almost 30,000 barrels.
Australia should move forward with a single national regulator for the offshore oil and gas industry to improve safety and protect the environment, he said.