PETROLEUM RESOURCE RENT TAX ISSUES AFFECTING THE USE OF DEDUCTIONS

2006 ◽  
Vol 46 (1) ◽  
pp. 577
Author(s):  
W.G. Cathro
Keyword(s):  
Joint Venture ◽  
Careful Planning ◽  
Resource Rent ◽  
Head Office ◽  
Petroleum Resource ◽  
Special Rules ◽  
Practical Implications ◽  
Taxable Profit ◽  
Offshore Petroleum

Careful planning is necessary when buying or selling an interest in an offshore petroleum area, farming into a project or setting up operating arrangements for a project within the petroleum resource rent tax (PRRT) net, to ensure maximum use of deductions for exploration expenditure and other costs of the project.The rules dealing with transfers of interests in petroleum projects and with the transfer of undeducted exploration expenditure from an unprofitable project to a profitable one, encourage participants to ensure that they hold an interest in the relevant area before they commence exploration activity.There are special rules applying in the PRRT context to the transfer of interests in a project from one person to another. It is important to understand how these rules apply as they can impact both upon who is liable to pay PRRT on the project and the ability to use and transfer exploration expenditure.Certain head-office costs are excluded from deductibility when calculating the taxable profit of a project. The manner in which a project is structured may impact on the practical implications of this exclusion.This paper provides an overview of the PRRT regime, the implications of the transfer of an interest in a project and the requirements which must be satisfied in order to transfer exploration expenditure between projects. The paper then contains a discussion of a number of issues in relation to deductibility and use of exploration expenditure, the transfer of interests in permits and the use of contractors to undertake activities on behalf of joint venture participants maximising the scope of available deductions.

scholarly journals Ethics, resource rent, environment and petroleum policy: the case of a small open economy

2021 ◽  
Vol 12 (1) ◽  
pp. 76-89
Author(s):  
Ola Honningdal Grytten ◽  
John Arngrim Hunnes
Keyword(s):  
Open Economy ◽  
Ethical Issues ◽  
Small Open Economy ◽  
The State ◽  
Resource Rent ◽  
The People ◽  
Petroleum Resource ◽  
Net Profit ◽  
Important Argument ◽  
Renewable Natural Resource

This paper contributes to the understanding of how the environment, ethics, values, and historical contingencies shape public policy. It explains the accomplishment of petroleum resource management in the small open economy of Norway. The study is conducted by mapping policy decisions and the arguments behind them regarding environmental and ethical issues. This is done by studying available governmental and parliamentary papers along with statements from politicians and central governmental officials. The paper also seeks to illuminate some of the decisions by quantitative measures. The paper firstly describes a model of Ricardian resource rent. Secondly, it investigates the set of values that were in place before the petroleum production started in the 1970s, as described in public documents. An important argument was to build a “qualitatively better society” for the benefit of the people. Thirdly, it traces the historical roots of these values by examining historical sources.The main findings are that success lies in understanding the ethics behind the environmental resource rent harvesting of this non-renewable natural resource. The paper concludes that the focus on the natural environment and resource rent management can be attributed to popular values built on historical traditions. According to them, the state and the trust between the state and its citizens played key roles in shaping the policy. The careful policy can be illustrated by the fact that Norway has managed to build one of the largest sovereign funds in the world worth USD 1,200 billion for use by future generations. Only 3% of its value, significantly less than its historical net profit, should be used annually.

Minding the pennies – at home and abroad

2018 ◽  
Vol 34 (1) ◽  
pp. 34-36
Keyword(s):  
Case Studies ◽  
Multinational Enterprises ◽  
Design Methodology ◽  
Reading Time ◽  
Local Culture ◽  
Foreign Subsidiaries ◽  
Content Type ◽  
Head Office ◽  
Pertinent Information ◽  
Practical Implications

Purpose This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings Discussions around multinational enterprises (MNEs) and how they run their foreign subsidiaries often relate to either the direction of traffic when it comes to autonomy and power or culture. For the latter, the textbooks are stuffed with case studies and examples of how things went mainly wrong when an MNE ventured into a certain market when it came to managing the local culture, with debates around globalization, localization, or (the horribly named) glocalization strategies and which one is best in any given circumstance. This is of course relevant and important, but often the meat of the story lies in the former category and the ensuing power struggles between head office and foreign hub. Practical implications The paper provides strategic insights and practical thinking that have influenced some of the world’s leading organizations. Originality/value The briefing saves busy executives and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

Financing LNG infrastructure using master limited partnerships

2016 ◽  
Vol 56 (2) ◽  
pp. 615
Author(s):  
Kenneth Wee
Keyword(s):  
Price Volatility ◽  
Investment Model ◽  
Key Factors ◽  
Resource Rent ◽  
The North ◽  
Oil Price Volatility ◽  
Petroleum Resource ◽  
Cost Efficient ◽  
Limited Partnerships ◽  
Mlp Model

In recent years, an unprecedented level of capital has been invested in developing Australia’s latest liquefied natural gas (LNG) projects, with several more still in the pipeline. In the wake of ever-increasing oil price volatility, and international competitiveness and uncertainty in the global financial markets, Australian LNG projects that are either under development or are being proposed continually face pressure to be more cost-efficient and value-accretive to their capital providers. The application of cutting-edge technology, such as floating LNG, together with more innovative financing strategies, are among the key factors that could provide more attractive project yields to make investing in new greenfield LNG projects more commercially viable. For many years, master limited partnerships (MLPs) have been used as a tax-effective financing vehicle in the North American energy and resources sector for funding the construction of gas infrastructure assets. This extended abstract explores the feasibility of holding Australian LNG infrastructure assets such as LNG pipelines and processing facilities within a MLP structure, including: how a typical MLP investment model would work in practice in the LNG sector; the fiscal treatment of a MLP and its impact on investor yield; the types of LNG assets that are appropriate for a MLP structure; the suitability of the MLP vehicle in the Australian context; commercial considerations in establishing and maintaining a MLP structure, including transactional costs and Australia’s unique Petroleum Resource Rent Tax regime; and, sustainability of the MLP model in the context of the current Australian and worldwide focus on fiscal accountability.

GREENHOUSE GAS ISSUES—ONE FOR THE AUSTRALIAN TAXATION OFFICE?

2005 ◽  
Vol 45 (1) ◽  
pp. 623
Author(s):  
J.H. Murray ◽  
E.A. Burns
Keyword(s):  
Carbon Dioxide ◽  
Greenhouse Gas ◽  
Carbon Dioxide Emissions ◽  
Joint Venture ◽  
Oil And Gas ◽  
Petroleum Industry ◽  
Development Project ◽  
Resource Rent ◽  
Greenhouse Emissions ◽  
Tax Relief

In the 21st century we are constantly bombarded with issues on the need to do more to protect the environment and deal with greenhouse gas issues. The petroleum industry world-wide has come under fire for the emissions produced as a by-product of the petroleum refining industry and all primary producers and refiners must develop strategies to reduce atmospheric carbon dioxide emissions. While it is probably fair to say Australia’s appetite for production and consumption of natural gas or LNG is much more environmentally friendly than the days of fossil fuel sources such as coal, there is still a long way to go to minimise emissions in the industry.Global oil and gas companies operating in Australia are leading the way to develop ways to reduce greenhouse emissions. Two examples are Gorgon joint venture plans for carbon dioxide sequestration for its gas development project and perhaps BHP Billiton’s comments that it sees potential for similar sequestration into coal seams onshore Australia in Queensland, South Australia or New South Wales.The costs of projects to re-use or re-inject or sequestrate greenhouse gases are likely to be significant. But are these operating costs of the taxpaying entities in question and would they qualify for tax relief for income tax or petroleum resource rent tax purposes? This paper looks at some of the projects now underway in Australia to reduce greenhouse emissions in the petroleum sector and assesses whether the type of costs likely to be incurred in such projects might qualify for tax relief under existing legislation.

Getting the message across—taxation contribution of the petroleum industry in Australia

2015 ◽  
Vol 55 (2) ◽  
pp. 432
Author(s):  
Carlo Franchina ◽  
Rod Henderson ◽  
Praneel Nand
Keyword(s):  
Common Ground ◽  
Oil And Gas ◽  
Petroleum Industry ◽  
Oecd Country ◽  
Life Cycles ◽  
Income Taxes ◽  
Resource Rent ◽  
Petroleum Resource ◽  
The Common ◽  
Oil And Gas Companies

With the global move towards tax transparency reporting measures, resource companies face challenges in ensuring that reporting captures the full extent of revenues contributed by resource companies and also correctly reports the project and profitability life cycles of resource companies. This extended abstract focuses on the global tax transparency debate and highlights the challenges for large Australian and global oil and gas businesses in demonstrating their payment of their fair share of tax and contributing to the communities in which they operate. Issues to be covered include: A summary of the revenue contribution of oil and gas companies in Australia through the layers of taxation, such as state royalties, the Petroleum Resource Rent Tax (PRRT) and corporate income taxes. Highlighting the types and rates of taxes paid by Australian oil and gas companies compared to other selected countries. A comparison of the concessions granted to Australian oil and gas companies to other countries. A historical summary of taxes paid by Australian oil and gas companies. A summary of existing and developing transparency reporting, such as the Australian Taxation Office (ATO) reporting of taxpayers with revenues more than A$100 million, the Extractive Industries Transparency Initiative, Dodd Frank rules, OECD country-by-country reporting, and BEPS developments. Recommendations to get the message across; that is, what should be the common ground on reporting the actual overall global tax liability including income tax, resource taxes, employment taxes and indirect taxes.

Contemporary fiscal issues impacting M&A in the oil and gas sector

2012 ◽  
Vol 52 (1) ◽  
pp. 149
Author(s):  
Kenneth Wee
Keyword(s):  
Oil And Gas ◽  
Oil And Gas Industry ◽  
Regular Feature ◽  
Gas Industry ◽  
Resource Rent ◽  
Petroleum Resource ◽  
Recent Developments ◽  
Australian Economy ◽  
To Come ◽  
Oil And Gas Sector

Ongoing growth in deal activity in the oil and gas industry is one of the critical forces underpinning the sustained robustness of the Australian economy. Australian oil and gas assets continue to attract significant international interest and are actively pursued by global and domestic investors alike. On the supply side, exploration players are seeking the necessary funding and technical support to commercialise prospective oil and gas discoveries, while on the demand side, major established oil and gas companies are seeking to acquire viable targets as a means of rapidly replenishing their reserves. Consequently, merger and acquisition (M&A) deals and asset trades have become a regular feature of the corporate oil and gas scene in Australia. In time to come, a wave of industry consolidation is likely to emerge. This paper discusses key fiscal aspects of M&A transactions, as affected by recent developments in the Australian taxation landscape, and their impact on the overall economics of, and extracting value from, an investment in the oil and gas sector, including: the taxation of farm-in/farm-out arrangements, asset swaps and carry arrangements; structuring the deal consideration for fiscal efficiency; takeover and acquisition vehicle structures; the M&A issues associated with the extension of the Petroleum Resource Rent Tax (PRRT) to the onshore oil and gas industry; consideration associated with capital management, capital structure and financing trends for the industry; exit and repatriation routes—do all roads lead to tax?; managing transaction costs; and, managing tax risks in M&A deals.

Tax issues impacting acquisitions in the Australian oil and gas industry

2011 ◽  
Vol 51 (2) ◽  
pp. 669
Author(s):  
Chad Dixon
Keyword(s):  
Income Tax ◽  
Oil And Gas ◽  
Investment Decision ◽  
Oil And Gas Industry ◽  
Capital Gains ◽  
Capital Gains Tax ◽  
Gas Industry ◽  
Resource Rent ◽  
Goods And Services ◽  
Petroleum Resource

Understanding the tax implications and structuring options of a transaction is critical when assessing and comparing new opportunities. When undertaking any transaction involving Australian oil and gas assets, the applicable taxation regime should be carefully explored and understood. From an Australian perspective, taxes such as corporate income tax, petroleum resource rent tax, capital gains tax, and goods and services tax have significant potential to influence the investment decision. This presentation will focus on the tax implications applicable to the acquisition and disposal of Australian oil and gas assets, providing valuable insights for both Australian companies and inbound investors.

Unitisation of petroleum project interests

2015 ◽  
Vol 55 (2) ◽  
pp. 497
Author(s):  
Wee Kenneth
Keyword(s):  
Oil And Gas ◽  
Development Project ◽  
Capital Gains ◽  
Capital Gains Tax ◽  
Resource Base ◽  
Resource Rent ◽  
Petroleum Resource ◽  
Key Issues ◽  
The Impact ◽  
Fiscal Implications

Traditionally, the unitisation of oil and gas project interests involved the exchange of legal ownership interests between project proponents to achieve uniformity of their licence interests across the project. Recently, more contemporary and creative forms of unitisation have emerged including economic, beneficial and contractual unitisation approaches that do not necessarily involve the transfer of legal title interests. Unitisation is a way of pooling resources to improve the likelihood of an economically viable project for participants and to overcome practical challenges resulting from uneven interests in the component parts of a broader project. In some cases, unitisation is the catalyst for project sanction. Achieving agreement and alignment on the most equitable unitisation outcome, including the valuation of the relative resource base and ownership stakes, is not easy. It involves navigating a myriad of legal, commercial, operational and financial considerations. A project residing in both federal and state waters can add increasing layers of complexity due to the interaction between overlapping federal and state jurisdictional and taxing rights. This extended abstract discusses key issues arising in various unitisation models and considers the associated fiscal implications from income tax, capital gains tax, petroleum resource rent tax and royalty perspectives. It also examines the government’s announced tax measures for dealing with the swapping of interests or interest realignments resulting in a common development project and the impact and effectiveness of these rules on unitisation arrangements.

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