Oil and gas sector benefits to flow beyond construction but spending remains under threat

APPEA has wanted that rising costs could threaten the huge financial benefits to Australia of major oil & gas projects, which could be worth nearly $100 billion to the national economy by 2035.

While the Australian oil and gas sector is in an unprecedented phase of investment, benefits could flow well beyond project construction to deliver a substantial and long-lasting boost to national income and tax revenue, according to the Australian Petroleum Production & Exploration Association (APPEA).

Deloitte Access Economics supplementary analysis to the report Advancing Australia – Harnessing our comparative advantage, sets out the economic impacts of the industry over a longer timeframe to the year 2035.

The analysis focuses on three oil and gas investment and production scenarios. These range from a ‘central development scenario’ that incorporates all oil and gas projects already committed to or highly likely to proceed, to a ‘high development scenario’ that includes all committed and proposed projects (including those that may be some time away from a final investment decision).

APPEA Chief Executive David Byers said: “The flow on benefits of this industry to jobs growth, wages and the economy is enormous but will only be achieved if we get the policy settings right.”

The analysis shows that under the higher development scenario GDP would increase by about $455 billion in NPV terms over the period from 2012-2035 compared to a central development scenario of an increase of $357 billion over the same period. The study shows the massive positive economic impact as the industry moves through the construction phase to the production phase.

Corporate and production taxes (including royalties) of $8.9 billion paid by the industry in 2010-11 would rise to $18.9 billion in 2035 under a high development scenario. Under this scenario, taxation revenues in net present value (NPV) terms would rise to $167 billion over the period from 2012 to 2035 (compared to $134 billion under the central development scenario).

Mr Byers said: “These sorts of benefits can’t be achieved if project development costs continue to rise and long-term contracts are lost to other petroleum-exporting nations.”

“This analysis reinforces the need for policy makers to support, rather than hinder, structural change.

“The high cost of doing business in Australia at a time of increased international competition is making it much harder for Australia to win market share and attract investment.

“Only last week the Council of Australian Governments (COAG) deferred work on streamlining project environmental assessments and approvals – one of the critical policy priorities affecting timely delivery of major oil and gas projects.”

The reports can be downloaded from the APPEA website

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