NATIONAL AND STATE BENEFITS FROM OFFSHORE PETROLEUM

Abstract

A simulated cash flow for three sizes of offshore field (100 MMB, 250 MMB and 1,000 MMB) can be made for a 20 -year period. The objective is to estimate not only the revenues of the producer but also to derive the probable expenditure patterns in the National and State economy and the flow of tax moneys to the respective governments.

On the values selected the 100 MMB field would not be produced if the company gave proper importance to the result of the discounted-cash-flow exercise. For the 250 MMB field the governments' share of royalty and company tax would be 31 per cent of the gross value of the barrel (at an Australian supply price of $2.06); while for the 1,000 MMB field the share would be 36 per cent. These are conservative estimates of the cash flow going into the public purse. Of total expenditures in Australia it seems likely that only 65 per cent are retained in Australian accounts. The rest is import content. In a particular State the retention would be around 20 per cent at the exploration stage in offshore work, 50-60 per cent for development and some 80 per cent for operational expenses. On this sort of figuring a table of direct expenditures, including royalties, can be computed for the State over the whole period. For a 250 MMB field the annual contribution to State spending is significant. It has, of course, multiplier effects also. Labour multipliers, as distinct from income multipliers, are often significant. They are variable depending on the initial development of the region and the contribution offshore oil can make to the regional economy. If close to the capital city the oil field, at all stages, may employ existing engineering services, shipping, supply and labour. New jobs in these supporting services are therefore transfers from other industries if the unemployment rate is low. Thus, for the capital city the job multiplier may be as low 1.03 (3 per cent is the normal rate of growth of the work force) with only minor additions created by oil workers and staff brought in from other States. At the other extreme a discovery on an isolated stretch of coast could require a new port, and port-town development for treatment plant and other oil field services. The job multiplier for the area (number of jobs created for each new one in the oil industry) could well be three or four. In time, and supposing that such a settlement became a port for other traffic, e.g. minerals, and that fuel-and- power-using and chemical industries became attracted to the facilities (consider Port Hedland, Kwinana and Westernport Bay) the regional job multiplier could in time reach a value of 15-20. Offshore oil, in the right location, can be a costless, efficient vehicle for decentralisation policy.