❓ Hon. Norman Moore questions the Treasurer on discrepancies between oil price forecasts, revenue estimates for the North West Shelf, and actual oil prices. The Treasurer provides explanations related to production volumes, exchange rates, and LNG pricing.
AnsweredQoN 437Legislative Council
QuestionView source ↗
NORTH WEST SHELF, oil prices and revenue
I refer the Treasurer to the government’s oil price forecasts and revenue estimates for the North West Shelf. (1) Will the Treasurer explain why the recent budget shows estimated total revenue of $472 million for 2004-05, which is below the estimate of $503 million in the pre-election statement, despite the oil price estimate rising from $US45 to $US47 a barrel? (2) Will the Treasurer explain why the pre-election estimates and the latest budget used oil prices of $US45 and $US47 a barrel respectively as applying for the second half of 2004-05, when the oil price was above $US50 a barrel for almost the entire period? (3) Will the Treasurer indicate Treasury’s current estimate for 2004-05 revenue from the North West Shelf, given that the oil price has been above Treasury’s estimates throughout the second half of this year? (4) Will the Treasurer explain why the recent budget shows the oil price falling to $US40 a barrel in 2005-06 from the current estimate of $US47, yet revenue from the North West Shelf is estimated to rise from $472 million to $505 million? Hon LJILJANNA RAVLICH
I refer the Treasurer to the government’s oil price forecasts and revenue estimates for the North West Shelf. (1) Will the Treasurer explain why the recent budget shows estimated total revenue of $472 million for 2004-05, which is below the estimate of $503 million in the pre-election statement, despite the oil price estimate rising from $US45 to $US47 a barrel? (2) Will the Treasurer explain why the pre-election estimates and the latest budget used oil prices of $US45 and $US47 a barrel respectively as applying for the second half of 2004-05, when the oil price was above $US50 a barrel for almost the entire period? (3) Will the Treasurer indicate Treasury’s current estimate for 2004-05 revenue from the North West Shelf, given that the oil price has been above Treasury’s estimates throughout the second half of this year? (4) Will the Treasurer explain why the recent budget shows the oil price falling to $US40 a barrel in 2005-06 from the current estimate of $US47, yet revenue from the North West Shelf is estimated to rise from $472 million to $505 million? Hon LJILJANNA RAVLICH
AnswerView source ↗
I thank the member for some notice of this question. I seek leave to have the answer incorporated into Hansard . Leave granted. The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
(1) Will the Treasurer explain why the recent budget shows estimated total revenue of $472 million for 2004-05, which is below the estimate of $503 million in the pre-election statement, despite the oil price estimate rising from $US45 to $US47 a barrel? (2) Will the Treasurer explain why the pre-election estimates and the latest budget used oil prices of $US45 and $US47 a barrel respectively as applying for the second half of 2004-05, when the oil price was above $US50 a barrel for almost the entire period? (3) Will the Treasurer indicate Treasury’s current estimate for 2004-05 revenue from the North West Shelf, given that the oil price has been above Treasury’s estimates throughout the second half of this year? (4) Will the Treasurer explain why the recent budget shows the oil price falling to $US40 a barrel in 2005-06 from the current estimate of $US47, yet revenue from the North West Shelf is estimated to rise from $472 million to $505 million? Hon LJILJANNA RAVLICH replied: I thank the member for some notice of this question. I seek leave to have the answer incorporated into Hansard . Leave granted. The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
(2) Will the Treasurer explain why the pre-election estimates and the latest budget used oil prices of $US45 and $US47 a barrel respectively as applying for the second half of 2004-05, when the oil price was above $US50 a barrel for almost the entire period? (3) Will the Treasurer indicate Treasury’s current estimate for 2004-05 revenue from the North West Shelf, given that the oil price has been above Treasury’s estimates throughout the second half of this year? (4) Will the Treasurer explain why the recent budget shows the oil price falling to $US40 a barrel in 2005-06 from the current estimate of $US47, yet revenue from the North West Shelf is estimated to rise from $472 million to $505 million? Hon LJILJANNA RAVLICH replied: I thank the member for some notice of this question. I seek leave to have the answer incorporated into Hansard . Leave granted. The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
(3) Will the Treasurer indicate Treasury’s current estimate for 2004-05 revenue from the North West Shelf, given that the oil price has been above Treasury’s estimates throughout the second half of this year? (4) Will the Treasurer explain why the recent budget shows the oil price falling to $US40 a barrel in 2005-06 from the current estimate of $US47, yet revenue from the North West Shelf is estimated to rise from $472 million to $505 million? Hon LJILJANNA RAVLICH replied: I thank the member for some notice of this question. I seek leave to have the answer incorporated into Hansard . Leave granted. The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
(4) Will the Treasurer explain why the recent budget shows the oil price falling to $US40 a barrel in 2005-06 from the current estimate of $US47, yet revenue from the North West Shelf is estimated to rise from $472 million to $505 million? Hon LJILJANNA RAVLICH replied: I thank the member for some notice of this question. I seek leave to have the answer incorporated into Hansard . Leave granted. The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
Hon LJILJANNA RAVLICH replied: I thank the member for some notice of this question. I seek leave to have the answer incorporated into Hansard . Leave granted. The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
I thank the member for some notice of this question. I seek leave to have the answer incorporated into Hansard . Leave granted. The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
Leave granted. The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
(1) Will the Treasurer explain why the recent budget shows estimated total revenue of $472 million for 2004-05, which is below the estimate of $503 million in the pre-election statement, despite the oil price estimate rising from $US45 to $US47 a barrel? (2) Will the Treasurer explain why the pre-election estimates and the latest budget used oil prices of $US45 and $US47 a barrel respectively as applying for the second half of 2004-05, when the oil price was above $US50 a barrel for almost the entire period? (3) Will the Treasurer indicate Treasury’s current estimate for 2004-05 revenue from the North West Shelf, given that the oil price has been above Treasury’s estimates throughout the second half of this year? (4) Will the Treasurer explain why the recent budget shows the oil price falling to $US40 a barrel in 2005-06 from the current estimate of $US47, yet revenue from the North West Shelf is estimated to rise from $472 million to $505 million? Hon LJILJANNA RAVLICH replied: I thank the member for some notice of this question. I seek leave to have the answer incorporated into Hansard . Leave granted. The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
(2) Will the Treasurer explain why the pre-election estimates and the latest budget used oil prices of $US45 and $US47 a barrel respectively as applying for the second half of 2004-05, when the oil price was above $US50 a barrel for almost the entire period? (3) Will the Treasurer indicate Treasury’s current estimate for 2004-05 revenue from the North West Shelf, given that the oil price has been above Treasury’s estimates throughout the second half of this year? (4) Will the Treasurer explain why the recent budget shows the oil price falling to $US40 a barrel in 2005-06 from the current estimate of $US47, yet revenue from the North West Shelf is estimated to rise from $472 million to $505 million? Hon LJILJANNA RAVLICH replied: I thank the member for some notice of this question. I seek leave to have the answer incorporated into Hansard . Leave granted. The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
(3) Will the Treasurer indicate Treasury’s current estimate for 2004-05 revenue from the North West Shelf, given that the oil price has been above Treasury’s estimates throughout the second half of this year? (4) Will the Treasurer explain why the recent budget shows the oil price falling to $US40 a barrel in 2005-06 from the current estimate of $US47, yet revenue from the North West Shelf is estimated to rise from $472 million to $505 million? Hon LJILJANNA RAVLICH replied: I thank the member for some notice of this question. I seek leave to have the answer incorporated into Hansard . Leave granted. The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
(4) Will the Treasurer explain why the recent budget shows the oil price falling to $US40 a barrel in 2005-06 from the current estimate of $US47, yet revenue from the North West Shelf is estimated to rise from $472 million to $505 million? Hon LJILJANNA RAVLICH replied: I thank the member for some notice of this question. I seek leave to have the answer incorporated into Hansard . Leave granted. The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
Hon LJILJANNA RAVLICH replied: I thank the member for some notice of this question. I seek leave to have the answer incorporated into Hansard . Leave granted. The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
I thank the member for some notice of this question. I seek leave to have the answer incorporated into Hansard . Leave granted. The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
Leave granted. The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
The following material was incorporated - 1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
1. Estimates of North West Shelf petroleum royalties incorporate forecasts of production volumes provided to the Department of Industry and Resources by the project operators on a confidential basis, the estimated exchange rate, and assumed petroleum prices. Production volumes can vary relative to previous estimates due to unforseen factors such as technical difficulties experienced by production facilities or adverse weather conditions. The Budget estimate for 2004-05 North West Shelf royalties was lower than the Pre-election Financial Projections Statement estimate due to the combined impact of revised production volumes and an upward revision to the exchange rate. In addition, the budget estimates were adjusted to reflect the observation that the very high oil price was not flowing through to the LNG price. 2. The estimated oil price of $US45 per barrel for the remainder of 2004-05 in the Pre-election Financial Projections Statement was consistent with the average price of West Texas Intermediate between 1 December 2004 and 31 January 2005 of $US45.19 per barrel. The 2005-06 Budget estimate of $US47 per barrel for the remainder of 2004-05 was consistent with the average oil price between 1 July 2004 and 26 April 2005 (of around $US48 per barrel) and a downward trend in oil prices at the time the budget estimates were finalised in late April. 3. There has been no change to the Department of Treasury and Finance’s estimates of North West Shelf petroleum royalties since the 2005-06 budget estimates were published. The actual outcome for 2004-05 will be published in the 2004-05 Government Financial Results Report. In this regard, page 38 of the 2005-06 Budget Paper No.3 (Economic and Fiscal Outlook) outlined that petroleum royalties will vary by up to $15 million per annum for each $US1 per barrel variation in the oil price, and that the revenue impact depends on the extent of the flow-through to LNG prices. 4. The increase in estimated North West Shelf petroleum royalties in 2005-06 relative to 2004-05 reflects the full-year impact of production from the fourth LNG train (which commenced operations in September 2004) and the beginning of the 25 year agreement to export LNG to China. These higher production volumes more than offset the impact of the lower estimated average oil price on North West Shelf royalties over 2005-06.
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