Some geography lessons are in order..
The Australian resource sector was hit this morning by a proposal for a super tax on resources. This is hitting the Australian coal seam gas sector (none of which have arrived at final investment decision yet) particularly hard:
Super profits tax to hit sector hard
May 4, 2010
QUEENSLAND’S coal seam gas sector, considered to be the darling of the resources sector, could come crashing back to earth, with analysts expecting it to be one of the hardest hit under the federal government’s resource super profits tax.
John Hirjee, at Deutsche Bank, said coal seam gas to liquefied natural gas could be ”the biggest loser” from the proposed changes. He said the new tax regime could reduce the net present value of Santos and Origin’s planned projects in Gladstone by up to 40 per cent. Mr Hirjee said the tax could also add to the risks associated with unconventional LNG projects and dissuade international buyers
”We believe Santos and Origin are the most at risk, as we see their Gladstone LNG and Australia Pacific LNG projects as losers from [the tax]. Arrow Energy is also highly exposed to the CSG sector but remains under a takeover bid from Shell-PetroChina,” he said.
”With a 14-month consultation process prior to a possible July 1, 2012 implementation date, the CSG to LNG sector will face further short-term uncertainty.”
Belinda Robinson, the chief executive of the Australian Petroleum Production & Exploration Association, said the organisation’s own modelling presented a similarly grim scenario.
”There is no doubt it will be negative for the sector at a time when none of these projects have gone to final investment decision and some are seeking investment partners,” she said.
Ms Robinson said it was critical that, if the tax did apply, it was calculated as close to the extraction point as possible.
Figures by Deutsche found that an upstream tax would alter its estimates of net asset value on Santos’s GLNG project by 9 per cent and the company as a whole by 2.7 per cent.
However, an integrated tax scenario, calculated after processing, when the gas is worth much more, would hit GLNG by 40 per cent and Santos by 11.6 per cent.
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Thomas Nobel was already out in full force this morning to provide some geography lessons