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Queensland oil and gas royalties will become an instrument to increase domestic gas supply under measures announced in the Queensland Budget today.

The 2019-20 Queensland Budget papers reveal the Palaszczuk Government will increase the petroleum royalty rate by 2.5 per cent to 12.5 per cent from 2019-20, increasing government revenue by $476 million over the four years ending 2022-23.

The Government also announced a review into the design of Queensland’s current petroleum royalty regime “to ensure greater certainty and equity’’ and to simplify the current regime.

“While the Government has already taken measures to ensure greater certainty of domestic gas supply (for example, through release of gas tenures specifically to supply domestic gas), the review will identify further opportunities to strengthen domestic supply through the royalty regime settings,’’ the Budget papers state.

The sector will no doubt be disappointed in the announcement, noting the impact the increase could have on potential investment into Queensland while ceding competitiveness to other states as well as the importance of gas in the transition to clean energy.

Of immediate concern to industry will be the mechanics of how the increase will work and how it will apply to existing versus new investment, as well as how the proposed royalty review will proceed, and whether it will be independently conducted by the Office of State Revenue.

Potential price impacts on the domestic market at a time when the industry has been working hard to increase domestic supply will potentially play a part in how industry responds to the consultation process into the royalty regime redesign, the timing of which is yet to be announced.

In announcing the royalty hikes, the Government has argued Queensland petroleum tax rates remain competitive with other royalty regimes internationally, with crown royalty rates in Canada “typically up to 45 per cent”.

The resource sector is producing increasing returns for the state. Queensland Treasury analysis shows resource exports delivered more than $65 billion of the $85.2 billion total exports of Queensland goods in the 12 months to the end of April 2019.

The Queensland Resources Council also estimates thermal and metallurgical coal royalties will raise a record $4.46 billion for the Government in 2018/19, $940 million more than initially forecast in last year’s Budget and $200 million more than Treasury’s revised figures.

The Budget was a mixed bag for the resource sector, with an announcement ahead of the Budget of $380 million over five years to upgrade the Mount Isa rail line and reduce user charges by $20 million per annum.

Payroll tax for companies who have a payroll greater than $6.5 million will rise 4.95 per cent – around 6,000 employers

Companies and trusts will pay more land tax if they own property worth more than $5 million, raising another $238 million, although farms will be exempt.

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