Oil giant urges tax cuts

OIL giant ExxonMobil has called for tax cuts to encourage the use of gas for power generation in Victoria.

ExxonMobil Australia chairman Mark Nolan said yesterday offshore gas was taxed at more than six times the rate of brown coal and called on governments to level the playing field.
Victoria currently gets about 85 per cent of its electricity from brown coal-fired generation.

Concern over greenhouse gas emissions has sparked debate about alternatives, but Mr Nolan said the current tax regime made development of gas-fired power stations uneconomic.

The Federal Government levies a tax on all offshore gas production at a rate of about $1 per gigajoule.









The tax on coal, which is levied by the state government, is only about 6 cents a gigajoule.

ExxonMobil's call for tax cuts came as the company released a study highlighting the economic impact of its Bass Strait oil and gas fields. The study found that the company's annual contribution to Victoria amounted to more than $7.4 billion, with a direct contribution of $2.7 billion through the Bass Strait project and an indirect contribution of $4.7 billion.

Speaking at the APPEA conference yesterday, International Energy Agency director Claude Mandil called on the Australian Government to change its position on carbon pricing in a bid to encourage companies to invest in clean coal technology.

"Why would you expect the industry to capture and sequestrate CO2 if there is not a cost for CO2 emissions and so a saving for sequestration? They will not," he said, referring to the technology used to capture and store carbon dioxide from coal-fired power plants.

"I don't see how it can be done in the long term, only on a voluntary basis."

But Mr Nolan denied the company was flexing its muscles in a bid to see the tax regime changed.

"The opportunity to grow gas more is not just of benefit to the company; it provides a benefit to the environment and a benefit to the community," he told reporters at the Australian Petroleum Production and Exploration conference in Queensland.

"Gas-generated power generation produces up to 70 per cent less greenhouse gas emissions than coal. What we're asking the government for is not special treatment, but for equal treatment."

Origin Energy is currently considering investing $1 billion in a gas-fired power station at Mortlake, in the state's east.

However, Victoria's abundant supplies of brown coal mean fossil fuels are likely to remain the mainstay of power generation for many years to come.

A spokeswoman for Federal Resources Minister Ian Macfarlane said last night the issue had not been raised with the minister.

The Federal Government has resisted the introduction of a carbon tax or a trading scheme similar to that which operates in Europe, however the state Labor governments are pressing ahead with plans to introduce emissions trading.

Mr Mandil said the IEA had made its position known to the Federal Government.

Asked how imperative it was to introduce a price on carbon in Australia, Mr Mandil said: "The shorter the better".

Mr Mandil also warned yesterday that the world would have to endure high oil prices for at least another few years.

He said tight supply was being exacerbated by the tense political situation.

"We're probably in for high prices for a while now, for at least two to three years, except if consumers can be more efficient in their consumption," he said.