Tax relief call for oil, gas explorers
Australia’s oil and gas industry has made a pitch to government for an exploration tax break already used by miners to be extended.
Australia’s oil and gas industry has made a pitch to the federal government for an exploration tax break used by miners to be extended to energy players as it seeks to rekindle investment in the sector following the COVID-19-induced oil crash.
The Australian Petroleum Production and Exploration Association, which represents the nation’s energy producers, laid out a blueprint to Prime Minister Scott Morrison in July to kickstart an economic recovery by boosting exploration investment and cutting regulatory hurdles.
One of its “quick start” initiatives involves expanding a mining exploration tax credit, called the Junior Minerals Exploration Incentive, to the petroleum industry to spur greater investment.
Under the current scheme, petroleum exploration is excluded, meaning junior companies cannot access the incentive.
“The onset of the COVID-19 pandemic has only increased the challenges faced by junior explorers,” APPEA chief executive Andrew McConville said in the lobby group’s submission to the government.
“A smaller pool of capital that will be more mobile and subject to tighter hurdle rates will see investment in junior explorers become challenging.
“This is clearly a need for additional support for junior explorers. Without additional support such as that offered by the JMEI, the impacts on the long-term health of the resources sector, the jobs it creates and the contribution it makes to the economy as a whole will be impacted significantly.”
The Department of Industry, Science, Energy and Resources is currently reviewing the exploration incentive to assess its success in attracting investment.
The policy aims to boost investment in greenfields exploration by allowing explorers to convert some of their tax losses into credits which are then passed on to investors of new shares as a franking credit or refundable tax offset.
Oil and gas exploration companies have taken a hit from COVID-19 but many are unable to access JobKeeper as they are “pre-revenue” and unable to satisfy the decline-in-turnover test.
Exploration work programs have made a “very modest” recent recovery, APPEA noted, but face uncertainty due to the pandemic.
“Australia needs to maintain a stable, attractive policy environment to reverse the decline in petroleum exploration investment,” Mr McConville said.
The federal government is already fielding COVID-19 recovery solutions from influential bodies such as the Business Council of Australia, even as a second wave of cases unsettles the economy and delays any post pandemic financial boost.
The government has received a final report from the National COVID-19 Co-ordination Commission manufacturing task-force chaired by former Dow boss Andrew Liveris.
A draft proposal suggested a “gas-led” recovery involving guaranteeing gas volumes, opening new fields and building pipelines to halve the price of the fossil fuel to a $4 a gigajoule target.