Santos welcomes Queensland petroleum royalty review outcome.
Santos welcomes Queensland petroleum royalty review outcome.

Hope new gas royalty model will drive investment

IT'S hoped a new royalty model designed to deliver longer-term policy certainty will make Queensland's gas industry a more attractive investment prospect as concerns are raised about medium-term domestic gas supply on the east coast.

The volume-based model will see royalties calculated on the volume of gas produced and will include a sliding rate scale.

The change will mean almost $100 million in extra royalties for the state, according to reports from The Courier-Mail.

Treasurer and Minister for Infrastructure and Planning Cameron Dick described the new volume-based model as "transparent, equitable, administratively simpler and locked in for five years".

It's a sentiment shared by Santos and its partners, who have paid more than $300 million in royalties since 2016.

Santos chief executive officer Kevin Gallagher said the new model provided a "clean break" from the administrative, technical and legal challenges of the past.

"The new Queensland royalty model is simple, efficient, equitable and transparent. It provides certainty to encourage ongoing investment in new gas supply and it will incentivise producers to innovate and reduce their cost of supply, which in turn will help put downward pressure on gas prices," he said.

According to the June report from consultancy firm EnergyQuest, the medium-term outlook (to 2030) for Australia's east coast gas supply could affect Gladstone's exports.

"We expect one and possibly two of the Gladstone LNG trains to be closed as increased gas volumes are diverted from the LNG projects to the domestic market," the report said.

"Removal of restrictions to allow gas development in Victoria and NSW would certainly be helpful, and the recent Victorian decision to allow drilling for conventional gas is positive although unlikely to materially affect total east coast supply."

The Australian Petroleum Production and Exploration Association also welcomed the policy certainty that would be delivered as part of the new royalty arrangement.

APPEA chief executive Andrew McConville said clarity on the government's policy position was important as industry considered its next round of investment in developing the state's gas resources.

The new model follows a review undertaken by a working group independently chaired by former South Australian premier Jay Weatherill that examined different royalty options.

Mr Weatherill concluded that the current royalty regime was not suitable for the existing configuration of the Queensland gas industry and recommended that a volume-based model be adopted.