Australian watchdog doubts NWS venture deduction claims

The Australian National Audit Office on Monday issued a report saying that the North West Shelf (NWS) project claimed more than A$5 billion (Approx: US$3.7 billion) worth of deductions against petroleum revenues in the 18 months to December 2015.

In its report, ANAO said that there has not been adequate scrutiny of claimed deductions and that is 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 Royalty Schedule does not permit all the deductions currently being claimed,” the report said.

Revenue reported by producers from NWS petroleum sales between July 2014 and December 2015 was A$19.7 billion. From this, A$1.9 billion in royalties was collected. The Australian Government retained A$0.6 billion (32.3 per cent) and the remaining A$1.3 billion (67.7 per cent) was paid to Western Australia.

There are some significant shortcomings in the framework for calculating NWS royalties. The consolidated Royalty Schedule, which governs those calculations, has not been updated in the last 10 years, the watchdog said in the report.

It adds that “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.”

Based on calculations advised by the Department of Industry, Innovation and Science (DIIS) to the ANAO in July 2016, the maximum underpayment of royalties is suggested to be in the order of $11.6 million, if all such deductions were found to be non-compliant.

The audit office had its recommendations for improvement in royalty collection by the Australia’s Department of Industry, Innovation and Science.

However, in its response to the recommendations, Western Australian Department of Mines and Petroleum said that the “North West Shelf royalty revenue verification processes are robust and adequate, and the Commonwealth and State Governments can be confident that royalties are being accurately assessed and collected.”

The Woodside-operated North West Shelf project includes the Karratha gas plant has a production capacity of 16.3 million tons a year from five liquefaction trains.

Other partners in the NWS project are BHP Billiton, BP, Chevron, Japan’s Mitsubishi Corp and Mitsui & Co, and Royal Dutch Shell.

1 AUD = 0.746985 USD

LNG World News Staff