feature

Chevron's 30+ year economic impact in Australia

The Perth city skyline.

Chevron’s development of the Gorgon and Wheatstone natural gas projects, together with Chevron’s other activities in Australia, will create enduring benefits that will help shape the Nation’s economic future and spearhead Australia’s growing importance as a global natural gas supplier.

The projects Chevron has invested in and its other activities in Australia1 have already delivered direct and indirect economic benefits to the Australian economy. Over the period 2009 to 2016, these include:

  • More than $60 billion has been committed to Australian goods and services to develop the Gorgon and Wheatstone Projects2
  • Almost 1000 contracts have been awarded to Australian companies to develop the Gorgon and Wheatstone Projects.
  • Almost 19,000 workers have been directly employed.
  • Paid $4.5 billion in Australian taxes.
  • More than $1.5 billion has been invested in research and development in Australia.
  • More than $53 million has been invested into universities and research institutes to help build local academic excellence and research capability.
  • Almost $300 million has been committed to community investments, including $250 million to critical and social infrastructure in Onslow associated with the Wheatstone Project.
  • Nearly $1.6 billion has been spent on exploration activities in Australia between 2009 and 2014, resulting in more than 25 offshore discoveries.

The projects Chevron has invested in and its other activities in Australia are expected to deliver significant long-term direct and indirect economic benefits to the Australian economy. Over the period 2009 to 20403, these include:

  • More than $1 trillion to the Gross Domestic Product (GDP) of Australia, nearly $32 billion per year.
  • Almost 150,000 full time equivalent (FTE) job years in Australia, nearly 5000 per year.
  • $338 billion to Federal Government revenue.
  • More than $320 billion added to real incomes in Australia, around $10 billion per year.
  • At full capacity, the Gorgon and Wheatstone Projects have the capacity to produce 500TJ/d of domestic gas (domgas), around 50 per cent of current domgas supply in Western Australia.
  • In operations, for every Chevron job, another job will be created in Australia.

1 Chevron’s head office activities in Australia are managed through the Australian Business Unit.
2 Value of work done to first quarter 2015.
3 The third party independent economic forecasts from ACIL Allen during the period 2009-2040 and are based on indicative estimates as of January 2015.

Chevron is generating significant economic benefits in Australia.

capital investment A$80 billion+

capital expenditure on Gorgon and Wheatstone by Chevron and our partners

1000+ contracts awarded to Australian suppliers

local contracts
1000+

contracts awarded to
Australian suppliers

A$1 trillion+ added to Australia’s GDP as a result of projects Chevron has invested in (2009 to 2040)

gross domestic product A$1 trillion+

added to Australia’s GDP as a result of projects Chevron has invested in (2009 to 2040)

A$338 billion generated in government revenue (2009-2040)

federal government revenue A$338 billion

generated in government revenue (2009-2040)

A$320+ billion added to real incomes in Australia (2009 to 2040)

personal income A$320+ billion

added to real incomes
in Australia
(2009 to 2040)

A$250 million committed to community projects by Chevron and our partners (2009 to 2014)

almost A$300 million

committed to community investments, including A$250 million to critical and social infrastructure in Onslow

A$53 million invested into universities and research institutes (2009 to 2014).

education investment
A$53 million

invested into universities and research institutes (2009 to 2014)

A$1 billion spent on research and development in Australia (2009 to 2014)

R&D
A$1 billion

spent on research and development in Australia
(2009 to 2014)

A$60 billion+ committed to Chevron suppliers through the Gorgon and Wheatstone projects (2009 to 2016)

local suppliers
A$60 billion+

committed to suppliers through Gorgon and Wheatstone
(2009 to 2016)

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150,000 jobs created around Australia
petroleumresourcerenttax(prrt)

petroleum resource rent tax (PRRT)

response to the release of the petroleum resource rent tax review

  
Chevron Australia welcomes the release of the Callaghan review on Petroleum Resources Rent Tax (PRRT). We agree with the main conclusions of the review, particularly that the PRRT has worked as intended encouraging major investment.

In Chevron Australia’s case, it has underpinned two major projects, Gorgon and Wheatstone, which have already delivered a range of benefits to Western Australia and Australia. They include:

  • $60 billion in local content;
  • 600 Australian companies supported during construction;
  • 19,000 construction jobs created; and
  • new domestic gas supply representing about 50 percent of the current WA market.

And despite claims you hear that Chevron Australia doesn’t pay its taxes, the company has paid around $4.5 billion in state and federal taxes since 2009.

After reaching full production, forecasts show Chevron will pay $2 to $3 billion a year in taxes by early to mid-2020s. That is before we pay PRRT.

We agree with the Callaghan Review’s finding against reverting to a royalty system. The PRRT should be retained, as it delivers a range of advantages to this nation. They include:

  • Australia benefits through higher tax revenues;
  • the community benefits from local employment, local contracts and domestic gas; and
  • companies like Chevron benefit through profitable investments.

Read full statement here.

PRRT is working

The $200 billion-plus investment in Australia’s energy industry is evidence that the current tax regime is working.

The Petroleum Resource Rent Tax (PRRT), which is currently under review by the Federal government, was introduced in the 1980’s as a profits-based tax designed to deliver substantial returns once investors had recovered their capital costs. Its high 40 percent tax rate has netted in the order of $25 billion for the nation over three decades.

Chevron Australia expects to start paying Petroleum Recourses Rent Tax (PRRT) by 2029-2035 and pay $60-$140 billion over the life of our projects.

Chevron Australia - one of the largest investors in the Australian petroleum industry leading the combined investment of $80+ billion in the Gorgon and Wheatstone projects - is testament to the sound working of the PRRT in attracting investment into Australia.

Chevron is making a significant economic contribution - on jobs, tax revenue and energy security.

Since 2009, Chevron’s paid about $4.5 billion in federal and state taxes and royalties. Once the Chevron-led Gorgon and Wheatstone Projects are up and running and profitable, this contribution will increase significantly.

It is entirely appropriate that projects in the start-up phase have not yet generated company tax. Their fiscal and economic benefits must be assessed over their entire project lives, which in the case of Gorgon is 40+ years.

Any changes to the PRRT must ensure future investment is encouraged; that existing project economics are not retrospectively undermined; and that Australia’s international competitiveness is not further compromised.

Independent research shows over the operating lives of Gorgon and Wheatstone (2009 to 2040) as well as Chevron’s other activities in Australia, these operations are expected to deliver:

  • More than $1 trillion to Australia’s GDP
  • Almost 150,000 jobs in Australia
  • $338 billion to Federal government revenue

For Australia to remain competitive at attracting constrained capital, it needs to offer globally attractive fiscal regime, not make more adverse changes to the PRRT.

Chevron Australia, along with other oil and gas companies, has provided a submission to the Government’s PRRT review which you can read here.

Read more about our economic impact here.

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senateeconomicsreferencecommittee

senate economics reference committee

chevron australia opening statement

  
Nigel Hearne - 28 April 2017

Thank you Chair

My name is Nigel Hearne, I am the Managing Director of Chevron Australia. I have been in this role for almost a year. I have with me Michael Fenner, who has been Chevron Australia’s Tax Manager for the past 11 years.

I do want to make a short opening statement about the Petroleum Resources Rent Tax (PRRT).

We welcome the release of the Callaghan Review this morning. We agree with the main conclusions of the Review, particularly that the PRRT has worked as intended encouraging major investment.

In our case, it has underpinned two major projects, Gorgon and Wheatstone, which have already delivered a range of benefits to Western Australia and Australia. They include:

  • $60 billion in local content;
  • 600 Australian companies supported during construction;
  • 19,000 construction jobs created; and
  • new domestic gas supply representing about 50 percent of the current WA market.

And despite the claims you hear Chevron Australia doesn’t pay its taxes, we have paid around $4.5 billion in state and federal taxes since 2009.

After reaching full production, forecasts show Chevron Australia will pay $2 billion to $3 billion a year in taxes by early to mid-2020s. That is before we pay PRRT.

We agree with the Callaghan Review’s finding against reverting to a royalty system. The PRRT should be retained, as it delivers a range of advantages to this nation. They include:

  • Australia benefits through higher tax revenues;
  • the community benefits from local employment, local contracts and domestic gas; and
  • companies like Chevron Australia benefit through profitable investments

Australia will ultimately receive more tax revenue from a profits-based tax than a royalty.

Yes, there is a delay in payment – this has been deliberately designed so investors get to recover the cost of each project. But after that point, the PRRT hits at 40 percent, which together with company tax, gives the taxpayers a super-charged return at an effective tax rate of 58 percent.

To demonstrate this, let me put our current PRRT forecasts on the table. Based on a range of price and other assumptions, Chevron Australia is expecting to first pay PRRT somewhere between 2029 and the mid-2030s and expecting to pay a quantum of between $60 billion and $140 billion over the life of the projects.

That is significant number and I would like to restate it– we expect to pay $60 billion to $140 billion in PRRT. But it is of course heavily dependent on commodity price assumptions and our investment cycle.

So don’t judge the PRRT by what it has generated in the first years of this LNG boom – judge it by the tax to be paid over the lifecycle of the projects.

A profits based tax also generates more revenue because it also encourages more investment.

At Chevron, we have plans to spend billions more in Australia, with a focus on two areas – expanding gas production off the Pilbara coast; and our search for oil in the Great Australian Bight, which could be Australia’s next Bass Strait.

If Australia wants major companies to continue to invest in exploration and development, and further provide for Australia’s energy security, then fiscal stability matters. Adverse changes to PRRT could discourage such future projects.

The Review has recommended some prospective changes to some elements of the PRRT. We will be happy to work with the Government on these details. But any changes, the Government or this committee is considering to the PRRT, should meet a strict test:

  • they should encourage future investment;
  • they should not retrospectively impact project economics;
  • any changes should not compromise Australia’s international competitiveness; and
  • any changes to individual elements of the PRRT must be considered as a whole. Changing one part of the PRRT can easily have unintended consequences.

Thank you.

Read Chevron Australia's opening statement from the 18 November 2015 Senate Economics Reference Committee Hearing here.

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media statements

  
18 August 2017

Chevron Australia has reached agreement with the Australian Taxation Office on the loan transfer pricing dispute and have withdrawn our appeal to the High Court. Chevron believes the agreed terms are a reasonable resolution of the matter and are not expected to have a material impact on the year to date results of the company.

 

19 May 2017

Chevron Australia has decided to seek special leave to appeal to the High Court of Australia in relation to its financing dispute with the Australian Taxation Office. 

As recognized by the Federal Court, Chevron Australia’s financing is a legitimate business arrangement, and the parties differ only in their assessments of the appropriate interest rate to apply. 

Chevron Australia pays a substantial amount of tax in Australia, including royalties, payroll tax, fringe benefits tax, excise and interest withholding tax.  Since 2009, we’ve paid about $4.5 billion in federal and state taxes and royalties. 

We are one of Australia’s largest investors and employers. In addition to tax payments, Chevron will continue to deliver substantial economic benefits for decades to come

 

21 April 2017

Chevron is disappointed in today’s decision of the Federal Court of Australia regarding its financing dispute with the Australian Taxation Office. We will review the decision to determine next steps, which may include an appeal to the High Court of Australia.

As recognized by the trial court in the dispute, the financing is a legitimate business arrangement and the parties differ only in their assessments of the appropriate interest rate to apply.

Chevron Australia pays a substantial amount of tax in Australia, including royalties, payroll tax, fringe benefits tax, excise and interest withholding tax. Since 2009, we’ve paid almost $4 billion in federal and state taxes and royalties.

We are one of Australia’s largest investors and employers. In addition to tax payments, Chevron will continue to deliver substantial economic benefits for decades to come.

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mythbusting 

general tax

  
Is Australia getting its ‘fair share’ from multi-nationals like Chevron?

Chevron Australia pays a substantial amount of tax in Australia, including royalties, payroll tax, fringe benefits tax, excise and interest withholding tax. Since 2009, we have paid around $4.5 billion in state and federal taxes and royalties. After reaching full production, forecasts show these figures will increase to $2 billion - $3 billion a year by the early to mid-2020s.
 

Why is Chevron accused of not paying tax?

Chevron does pay tax. Chevron Australia pays a range of taxes and charges including royalties, payroll tax, fringe benefits tax, excise and interest withholding tax. Since 2009, we have paid around $4.5 billion in state and federal taxes and royalties. During this same period Chevron Australia was spending tens of billions of dollars constructing two major LNG and domestic gas projects – Gorgon and Wheatstone - and did not make a single dollar of profit.

The following graphic explains the taxes paid across the lifecycle of major projects:

The following graphic explains the taxes paid across the lifecycle of major projects.
 

Activist group GetUp recently accused Australian corporations of getting a ‘free pass’ on tax. What is your response?

Activist scare campaigns continue to mislead rather than contribute to a constructive debate on tax reform in Australia.  Comments by GetUp’s National Director on Chevron’s tax affairs are flat out wrong.  Since 2009, Chevron Australia has paid about $4.5 billion in federal and state taxes in Australia.

The nation’s tax rules apply to us in the same way they do any other business. The Chevron-led Gorgon and Wheatstone Projects are largely under construction and have not yet produced a dollar of profit. Once these projects are up and running, our tax contribution will increase. Independent analysis from ACIL Allen has forecast Chevron will pay $2 to $3 billion a year in company tax to 2040.

We need to encourage the next wave of investment in oil and gas – not impede the nation-building projects which deliver the thousands of jobs and billions in tax revenue.  The Australian public deserves better than activist scare campaigns that fail to contribute to a constructive policy debate.
 

economic contribution

 
What is Chevron’s economic contribution to Australia?

Chevron’s projects and activities in Australia have delivered significant economic and social benefits. Once Gorgon and Wheatstone are in full production, they will have an even greater economic impact. An independent economic analysis by ACIL Allen shows between 2009 to 2040, Chevron projects and other activities will deliver:

  • more than A$1 trillion to Australia’s gross domestic  product, nearly $32 billion per year;
  • almost 150,000 full time equivalent job years  in Australia, nearly 5,000 jobs a year
  • more than $320 billion added to real incomes  in Australia, around $10 billion per year; and
  • more than A$338 billion to Federal Government revenue.

Chevron Australia is proud of its achievements in developing the Gorgon and Wheatstone projects and the economic contribution these projects will make to the Australian economy over their operating lives.

At full capacity, Gorgon and Wheatstone have the capacity to produce 500TJ/d of domestic gas, around 50 per cent of WA’s current domgas supply.
 

What tax contribution does Chevron make?

Chevron Australia pays a range of taxes and charges including royalties, payroll tax, fringe benefits tax, excise and interest withholding tax.

Since 2009, Chevron Australia has paid around $4.5b in federal and state taxes, as shown in the below chart:


 Chevron Australia taxes and royalties paid 2009 to 2016

 Tax/Royalty  2009 to 2015
(A$ Millions)
 2016
(A$ Millions)
 Total 
(A$ Millions)
 Income Tax  385  0  385
 Fringe Benefits Tax  253  57 310
 Royalties  1,623  128  1,751
 Excise  872  56  928
 Payroll Tax  245  50  295
 Interest Withholding Tax  635  193  828
 Foreign Resident Withholding Tax  13  0  13
 Royalty Withholding Tax  5  1  6
 GST – Denied Input Tax Credits  2  4  6
 Total  4,032  490  4,522
 

 

Why isn’t Chevron paying any income (company) tax?

While Chevron Australia did not pay income (company) tax in 2014/15, the company did pay a range of other taxes and royalties, totalling $574 million. The reason our 2014/15 taxable income was zero is because deductions for depreciation, our significant funding costs in Gorgon and Wheatstone, exploration costs, research and development costs and other operating costs were greater than our income which also declined along with global energy prices.
  

Does Chevron have any further detail about its tax and economic contributions?

To better inform the discussion around taxation reform and explain the substantial amount of tax Chevron pays in Australia, we have published a tax transparency fact sheet.

  • The document clearly outlines key facts and background on topics such as:
  • how taxes are paid across the lifecycle of major projects;
  • our current tax contribution; and 
  • our estimated future tax, Petroleum Resource Rent Tax (PRRT) and royalty contributions.
      

petroleum resource rent tax (PRRT)

 
How does the PRRT work?

The PRRT is a profit based tax. Once deductible costs are recovered, a tax rate of 40 per cent is applied. This high tax rate reflects that it is a true profits based tax. PRRT is only one of a range of State and Commonwealth taxes and charges applied to oil and gas. Australia’s PRRT rules apply to Chevron in just the same way as they do any other resources business.

Chevron Australia expects to start paying Petroleum Recourses Rent Tax (PRRT) by 2029-2035 and pay $60-$140 billion over the life of our projects.
  

Why aren’t we paying PRRT yet?

PRRT is a super-profits tax. It is deliberately designed to allow major projects to recoup their capital investments. After that time, PRRT is then payable at a rate of 40 per cent. This is on top of income tax – making for an effective tax rate of 58 per cent. Low prices and high construction costs have contributed to Chevron not being liable for PRRT yet. This is the way the tax is designed to work and the rules apply to all resources companies in the same way.

Based on a range of price and other assumptions, Chevron Australia expects to first pay PRRT somewhere between 2029 and the mid 2030s and expects to pay between $60b and $140b over the life of the projects.

This forecast is consistent with the findings of the Government’s Callaghan Review, which forecast a significant boost in PRRT revenues from the 2020s.

The review found also found “the PRRT remains the preferred way to achieve a fair return to the community for the extraction of petroleum resources without discouraging investment.
  

federal court litigation

 
What is the latest on Chevron's loan transfer pricing dispute with the ATO?

Chevron Australia has reached agreement with the Australian Taxation Office on the loan transfer pricing dispute and have withdrawn our appeal to the High Court. Chevron believes the agreed terms are a reasonable resolution of the matter and are not expected to have a material impact on the year to date results of the company.

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