speech Senate Economics Reference Committee
Chevron Australia Opening Statement
Good morning and thank you for this opportunity to make an opening statement.
Chevron is one of the world’s leading integrated energy companies and has been investing in Australia for more than 60 years. Chevron is leading the development of the Gorgon and Wheatstone natural gas projects which represent a combined initial investment of US$84 billion. Chevron’s share is the largest single investment by a company in Australia’s history. Chevron Australia is also a one sixth participant in the North West Shelf Project, Australia’s first and largest operating natural gas project.
The development of the Gorgon and Wheatstone Projects, together with Chevron Australia’s other activities, are creating enduring economic benefits on a scale never before seen in Australia; this is in terms of jobs, revenues and local content.
To date1, more than $45 billion has been committed to Australian goods and services and nearly 1,000 contracts have been awarded to Australian companies to develop the Gorgon and Wheatstone projects. Furthermore, Chevron Australia’s activities have directly employed almost 19,000 workers.
These two nation building projects will provide energy security for decades to come and will spearhead Australia’s growing importance as a global natural gas supplier.
Chevron Australia recently commissioned independent economic analysis from ACIL Allen Consulting. The analysis shows that over the period 2009 to 2040, the projects will deliver:
- more than $1 trillion to Australia’s gross domestic product;
- Almost 150,000 full time equivalent jobs in Australia; and
- more than $338 billion to Federal Government revenue.
Chevron is a significant taxpayer globally. Our worldwide effective tax rate was 38% in 2014 and has averaged 41% in the past five years.
Chevron is also a significant taxpayer in Australia. Over the past five years we have paid over $3 billion in Federal and State taxes and royalties, primarily attributable to our interest in the North West Shelf Project.
In recent years, North West Shelf revenues have been largely offset by costs associated with the construction of the Gorgon and Wheatstone projects and significant exploration and research and development expenditure.
Our current income tax profile reflects where we are in our investment lifecycle. To date, Chevron Australia has not earned a single dollar of revenue from our current Gorgon and Wheatstone investments, which remain under construction.
To be clear, Gorgon and Wheatstone are ‘bricks and mortar’ type tangible assets. Once these projects have been completed and are in full production, they will significantly increase Chevron Australia’s contributions to government revenue over their operating lives. Importantly, Chevron Australia’s revenues are immobile and they are subject to tax here in Australia.
In approaching our tax obligations, we seek to comply with the letter, the spirit and the intent of the law, in-line with our stringent global code of business ethics. Our philosophy is to be open and transparent in our engagement with the ATO. Where possible, we seek early engagement on significant, complex or uncertain matters across all facets of the tax law.
With regards to the recent legal proceedings between the ATO and Chevron Australia in the Federal Court, this is a case where Chevron and the ATO disagree on how the law applies.
It is important to note, Chevron Australia did not engage in any illegal activity or tax avoidance. In summarising the judgment, and I quote Justice Robertson:
“The case does not involve the general anti-avoidance provisions in Part IVA of the Income Tax Assessment Act 1936 nor does the case involve any allegation that the Credit Facility Agreement was a sham.”
The court dismissed Chevron Australia’s appeal on grounds that we did not provide sufficient evidence to prove that the intercompany interest rate was arm’s length.
Chevron Australia does not agree and will be appealing the decision.
Our current funding structure was put in place to fund our significant investment here in Australia. The size of our borrowings is a reflection of the size of our investment.
In closing, Chevron Australia is proud to be bringing the Gorgon and Wheatstone projects to life. These nation building resource projects have made a significant economic contribution during construction and will continue to make a significant contribution to the Australian economy over their 30 plus year operating lives.