$100M tipped to flow back to southwest under resource royalties
RESOURCE rich regions are set to benefit from a huge shake-up to Queensland’s royalties scheme, which is promising more money for the areas where oil and gas are produced.
Early estimates suggest hundreds of millions of dollars could be paid in to the southwest under the new Volume Model implemented by the Queensland Government this week; but the actual figures could be far harder to predict while the world is in the midst of an oil price collapse.
Despite current oil prices, companies which operate in the Surat, Eromanga, and Cooper Basins have welcomed the royalty review, and claim they will invest more in the region as a response to the changes.
Senex managing director and CEO Ian Davies said Senex and its partners had invested $400 million in Queensland over the past 18 months, and is now keen to secure and develop more acreage for the domestic gas market.
“We congratulate Queensland’s Treasurer Cameron Dick on his decision to create a more equitable and transparent system for the calculation of petroleum royalties,” Mr Davies said.
“This new approach will make investment decisions easier.
“On top of that, five years of royalty stability will enhance the attractiveness of investments that support jobs in rural and regional Queensland.”
Moving forward, companies based in the southwest will continue to consult with the government about the new royalty model.
Top bosses have already indicated that the change will make things easier in terms of administration and legal hoops; Santos managing director and CEO Kevin Gallagher said the new royalty model will open up more opportunities for the company to generate their products more cheaply.
“The new Queensland royalty model is simple, efficient, equitable and transparent,” he said.
“It provides certainty to encourage ongoing investment in new gas supply and it will incentivise producers to innovate and reduce their cost of supply, which in turn will help put downward pressure on gas prices.
“Queensland has a history of bipartisanship in supporting development of its oil and gas resources with a regulatory regimen that allows Queenslanders to share in the benefits of the industry and ensures development occurs safely and sustainably …
“The result of bipartisan support has been thousands of local jobs, business opportunities, thriving regions, reliable and affordable energy, and prosperity for generations of Queenslanders. I want to see that continue for future generations as well.”
How will it work?
The biggest change under the new Volume Model will be the way royalties are calculated. They will now be determined by measuring the amount of petroleum produced at the wellhead, rather than at the point of disposal.
From there, a royalty rate set by the government will apply, with different amounts set for petroleum, domestic gas, conventional gas, CSG, oil, condensate, and LPG.
In a report from Queensland Petroleum Royalty Review chairman Jay Weatherill, those rates are yet to be determined.
“More detail to derive the prescribed rate(s) would be needed, but would likely be derived
from publicly available benchmarks such as the published Wallumbilla Hub price … or a combination of benchmarks that reflect the relative volumes and destination of gas,” the report read.
Once prices are set, they will remain in place for a five years at a time.
Queensland Treasurer Cameron Dick said it would give certainty to the resources industry, which has been a boon for the state’s income, and promised it would create more local jobs down the track.
“Queensland’s gas industry continues to do the heavy lifting in supplying the gas for domestic markets in Eastern states, while also meeting the needs of international customers,” Mr Dick said.
“This review has been crucial in ensuring that oil and gas companies are treated fairly, and that Queenslanders receive their fair share of royalties from this important industry.
“The model is transparent, equitable, administratively simpler and locked in for five years.
“Importantly, the new model supports the Palaszczuk Government’s commitment to create more jobs in more industries.”