WA's biggest gas consumers are demanding a tax break for suppliers selling gas on the domestic market to combat soaring prices. But new data has cast fresh light on the Domgas Alliance claims big gas suppliers are gouging their customers.
WESTERN Australia’s biggest gas consumers have demanded a tax break for suppliers selling gas on the domestic market in a bid to combat soaring prices
But the Domgas Alliance’s appeal for tax breaks comes as new industry data cast fresh light on claims by big gas buyers that suppliers are unfairly gouging their customers on price.
The alliance, which represents major gas buyers such as Alcoa and Alinta, this week appealed to both Labor and the coalition to exempt domestic gas producers from Petroleum Resource Rent Tax payable on most Australian offshore oil and gas production.
The 40 per cent tax on petroleum profits, after capital and operating costs have been recovered, will soon be extended to cover all major Australian gas projects, including the North West Shelf.
Alliance executive director Gavin Goh said exempting domestic gas production from the tax would provide a significant incentive to develop further domestic gas supply.
“Gas producers would enjoy a tax incentive, while business and households would benefit from more domestic supply,” he said.
Mr Goh said exempting domestic gas producers from the tax would have only a modest impact on Commonwealth revenues, as domestic sales accounted for only a small proportion of national petroleum output.
“Any revenues foregone would be more than offset by taxes from existing downstream industries, as well as new projects dependent on domestic gas supply,” he said.
The alliance accuses big gas producers of “warehousing” gas that could be supplied to domestic buyers to reserve it for future processing and sale on the more lucrative global LNG market.
With federal authorities also allowing big gas producers to market their gas collectively to domestic buyers, wholesale gas prices in WA had risen threefold and were now up to three times higher than in east coast markets such as Victoria, he said.
“This is putting enormous pressure on business and household budgets,” Mr Goh said.
In April, the alliance said WA gas prices had risen from about $2.50 a gigajoule to around $8 a gigajoule under new contracts struck since 2005.
But the latest figures from the Woodside-operated North West Shelf, which accounts for 70 per cent of WA’s domestic supplies, show it received an average of just $3.74 per gigajoule for domestic gas sold during the June quarter.
In comparison, residential customers of Alinta, one of the biggest buyers of North West Shelf gas, pay around $29.80 per gigajoule for gas by the time it has reached their homes.
One senior gas industry executive, who declined to be named, said the discrepancy clearly showed that wholesale gas prices charged by gas producers represented “only a small proportion of the price paid by residential customers”.
The alliance’s claim that producers were responsible for putting pressure on household budgets was therefore unsustainable, he said.
Tom Baddeley, WA director of the Australian Petroleum Production and Exploration Association, said the alliance’s call for tax relief may be superficially attractive but did not recognise that some projects may be better off under the PRRT than more onerous existing regimes.
On the issue of joint marketing, he noted the Australian Competition and Consumer Commission had ruled just last month that it was in the public interest given the immature state of WA’s gas market.
“The big buyers of gas need to accept the decision and play on,” Mr Baddeley said. “I think we’re getting tired of the same old gripe that, again, hasn’t been supported by the independent umpire.”
