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Shell predicts free gas forever from Gorgon and Prelude LNG projects

Shell predicts free gas forever from Gorgon and Prelude LNG projects

by  | Mar 31, 2021 | Energy & Environment

Shell’s accountants predict the Dutch giant will never pay Australia for gas extracted at the Gorgon and Prelude LNG projects that it can sell for up to about $4 billion a year. Peter Milne from independent energy and climate news site Boiling Cold has the story.

Dutch giant Shell forecasts it will never pay Australia for oil and gas extracted for the Gorgon and Prelude LNG projects that it can sell for up to almost $4 billion a year.

Shell owns 25 per cent of the Chevron-operated $US54 billion Gorgon LNG project and 67.5 per cent of its Prelude floating LNG project that are both liable to pay Petroleum Resources Rent Tax.

Shell’s outlook of no PRRT payments is recorded in notes to the 2020 financial accounts for the global group released last week.

The note may not be apparent to a layperson, but the meaning is plain to an accountant: free gas forever from Australia.

PRRT is payable when a project’s income exceeds losses, and this would not be expected for some years after production starts due to the enormous cost of LNG projects.

To keep track of future PRRT payments, accountants recognise accumulated losses as a deferred tax asset and accumulated income as a deferred tax liability. Eventually, income should exceed losses, and PRRT is then paid at a rate of 40 per cent of the profit.

However, Shell’s accounts state that “deferred tax assets are recognised only to the extent it is considered probable that those assets will be recoverable.”

In other words, the accountants cannot record or “recognise” losses as a deferred tax asset if it is unlikely that Shell will pay any tax.

FULL ARTICLE

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