Future Group calls for 25% gas export levy

Future Group has called on the Australian government to introduce a broad-based 25% gas export levy.

Modelling by consulting firm Arthur D. Litter (ADL), commissioned by Future Group, found the 25% tax could generate up to $17 billion in the first year while driving down wholesale electricity costs by an estimated 15%.

Future Group said the increasingly volatile geopolitical situation means significant investment is required to fast-track the energy transition and drive domestic energy security.

Future Group warned Australia is at a pivotal moment and needs to ensure it doesn't miss out on its fair share of its gas exports as the International Energy Agency projects that Asia Pacific LNG demand is in structural decline and will peak by 2035.

The modelling found the gap between what Australia collects and what comparable nations collect is stark. For example, Norway captures approximately 57-60% of petroleum resource rents; Qatar captures around 35%; and the United Kingdom around 38-40%.

Australia's current effective resource rent capture rate sits at approximately 6.9% (PRRT + royalties and excise).

"Australia is one of the world's largest gas exporters, yet Australians see almost none of the benefit. A well-designed export levy improves basic economic fairness while driving down prices for Australian households and businesses," Future Group chief executive Simon Sheikh said.

"The window to act is closing. Asian demand for Australian gas will peak within a decade, and once it's gone, it's gone. We need to secure a fair return now, before that opportunity passes us by."

Additionally, the report found a 25% export levy would create a price incentive for gas producers to sell locally rather than abroad, reducing the cost for East Coast buyers compared to international buyers and increase domestic supply.

The report estimated this would reduce wholesale electricity costs in Australia by up to 15% compared to where they would be without any levy.

"An export levy makes it more attractive to sell gas to Australians. This policy will bolster the budget by $17 billion in the first year and reduce the wholesale price of electricity by up to 15%. It's a no-brainer," Sheikh said.

The ADL modelling also shows existing LNG projects would remain profitable under a 25% broad-based levy. The report found the internal rate of return (IRR) on existing legacy LNG projects is likely to reduce by an average of 2%, depending on the project, demonstrating that established projects remained comfortably profitable.

If the government chose to impose a prospective levy on gas exports (uncontracted gas only), the modelling found the government would secure a much smaller benefit of $3 billion per year. If it were to apply a 25% windfall levy, it would generate $1 billion of additional revenue per year on average over 10 years.

"Over the last few weeks, we have heard repeated claims about a levy causing an investment chill and putting trade relationships at risk. But the facts are clear: even with a 25% broad-based export levy, operational sites will remain highly profitable. And for those new projects that would be unviable, the modelling shows that the vast majority would not pass Final Investment Decision even without a levy," Sheikh said.

"For our trade relationships, the implications are clear - an export levy does not restrict volumes, cancel contracts, or limit production. It is an export levy on revenue. Australia will still be a reliable producer of LNG to the region."

Sheikh added Australians and the Australian budget are under incredible strain given the crisis in the Middle East and supply chains need to be bolstered to ensure the nation no longer relies on foreign fuel.

"The government will need to fast track Australia's sovereign energy capability and that requires bolstering government revenue," he said.

"The government could fast track heavy transport electrification which would insulate our supply chains from future shocks, bolster industrial energy security and resilience and substantially improve affordability by supporting long-term access to reliable, lower-cost energy. A 25% levy on gas can help fund these nation building investments."