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Australia Money

Gas, Royalties, and Who Gets What

Australia is one of the world's largest gas exporters. Yet it collects far less in royalties than comparable countries. Qatar earns 33 times more from similar volumes. Here is how the numbers break down.

TU

Staff Writer

21 April 2026 • 10 min read

Live Investigation

Australia sells more gas than almost any country on Earth. But it collects very little money from it. Some countries earn 30 times more from the same amount of gas. In four years, $170 billion worth of gas left Australia. Zero royalties were paid on it. The gas industry had $56 billion in revenue. It paid just 0.8 per cent tax. Qatar earns $26.6 billion a year from gas. Australia earns $800 million. The difference is not the gas. It is the deal. Most gas companies pay no special tax on their profits. They deduct years of costs first. A 2023 reform capped those deductions. But it only applies to new projects. The old ones, the big ones, keep the old rules. On the east coast, the government set a price cap on gas. Then exempted every major producer. Contracts for 2026 are already above the cap. Japan buys Australian gas on long-term contracts. Then resells it to other countries. Japanese trading houses make up to $14 billion a year from that. Australia does have options. Western Australia keeps 15 per cent of gas for locals. Its prices rose far less than the east coast. Other countries show that better deals are possible. The question is whether Australia will take them.

Gas, Royalties, and Who Gets What

In May 2024 the Australia Institute published a finding that drew attention across the country. Fifty-six per cent of Australia’s gas exports pay zero royalties. Over four years, $170 billion in royalty-free gas shipped offshore. (Source: Australia Institute, May 2024)

The gas industry turned over $56 billion in a single year. Paid $454 million in tax. That is a rate of 0.8 per cent. The Australian Taxation Office has described the sector’s companies as “systemic non-payers.” (Source: ATO transparency data, 2020-21)

For context, Australia Institute research found that beer excise collects more than Chevron, ExxonMobil, Woodside and Shell combined. (Source: Australia Institute, October 2024)

Australia holds some of the largest gas reserves on Earth. A country with those reserves collects far less per unit of gas exported than most comparable resource nations.

$170BRoyalty-free gas shipped offshore
0.8%Effective tax rate on $56B revenue
33xQatar earns more from similar volumes

The Qatar comparison

Qatar and Australia produce comparable amounts of LNG. Qatar’s government earns $26.6 billion a year in royalties. Australia earns $800 million. (Source: Australia Institute, October 2024)

That is not a typo. $26.6 billion versus $800 million.

The difference is not geology. Qatar negotiates as a single seller through QatarEnergy. It charges a royalty rate that collects money at the point of sale. Australia’s royalty framework, as the Australia Institute documented, effectively allows most producers to pay nothing. The structure of the arrangements, not the resource itself, explains the gap.

The tax that never collected

Australia has a Petroleum Resource Rent Tax. The PRRT is a tax on above-normal profits from offshore oil and gas projects. It is designed to capture a share of revenue when prices are high.

In 2014-15, 95 per cent of oil and gas projects paid zero PRRT. (Source: UTS study, 2017)

In 2023, PRRT payments were lower than in 2001. Record gas prices. Record revenues. Lower tax. (Source: Australian National Audit Office, PRRT performance audit; Treasury annual tax expenditure statement)

How does that work? Companies record their exploration spending as tax deductions, and those deductions grow each year until the project starts earning. Chevron’s Gorgon project saw its costs triple before any gas was sold. By the time revenue started flowing the deductible pool was so large that nothing was left for the tax. (Source: Treasury Laws Amendment, 2024)

May 2023. The Treasurer announced a cap. Ninety per cent maximum deductions. First meaningful PRRT reform in decades. It does not apply to existing projects. (Source: Treasury Laws Amendment Bill 2024)

The biggest projects, the ones already running and generating the revenue, continue under the old rules.

Japan and the LNG trade

Seventy-five per cent of Australian LNG is locked into long-term oil-linked contracts. Twenty-year sales and purchase agreements. The price is tied to oil benchmarks, not to the actual supply and demand of gas. These contracts lag spot prices by months, sometimes years. (Source: METI annual energy report; IEA World Energy Outlook, 2025)

These contracts were negotiated by willing parties. Australian producers agreed to them because they provided revenue certainty over long horizons, which made project financing possible. Japanese buyers agreed because they needed energy security for their import-dependent economy. Both sides benefited from the predictability.

Spot prices spike, Australian producers still sell at contract prices. Spot prices fall, Japanese buyers still pay above spot. That is how long-term contracts work - they trade flexibility for certainty.

Japan does not just consume the gas. Japan resells it.

Forty per cent of Japanese-managed LNG is now sold to third countries. Up from 16 per cent five years ago. Japanese trading houses buy Australian gas under long-term contracts, then resell at spot prices to other Asian buyers. Profit: between US$11 billion and US$14 billion a year. That money goes to Mitsubishi, Mitsui, Itochu and Sumitomo. Not to Australian taxpayers. (Source: Bloomberg LNG arbitrage analysis, 2025-26)

JBIC, Japan’s government bank, has issued sovereign-guaranteed bonds in international markets and used the proceeds to make direct loans to Australian LNG projects. More than $30 billion cumulatively. Those loans come with supply guarantees for Japan. (Source: JBIC press releases, December 2012 and May 2024; FoE Japan, October 2024)

Japan’s sovereign bank funded Australian gas extraction. In return, Japan secured long-term supply. Australia received the investment and the drilling. Japan received the gas and the resale margin.

The price cap that isn’t

In 2022 the federal government introduced a $12 per gigajoule price cap on east coast gas, roughly a cap on the wholesale price per unit that generators and industrial users pay. Prices had tripled since the Gladstone LNG terminal opened. Something had to be done. This was the something. (Source: DCCEEW Gas Market Code)

The ACCC reported in March 2026 that producer contract prices for 2026 are $13.55 per gigajoule. Thirteen per cent above the cap. Retailer contracts: $13.93. Sixteen per cent above. By 2027, producer contracts forecast at $13.93 and retailer contracts at $14.31. (Source: ACCC Gas Inquiry March 2026 Interim Report)

How? Every major east coast producer has a Ministerial exemption from the cap.

APLNG. Santos, twice. Shell. Woodside Bass Strait. Esso. Senex. Walloons CSG. All exempt. (Source: ACCC exemptions register)

The exemption framework covers the vast majority of supply. No enforcement actions have been taken. The cap, in practice, has not functioned as a ceiling.

December 2025. The Gas Market Review recommended scrapping the price cap entirely. Concluded it “did not adequately address the supply issue” and “provided no real relief for domestic gas users.” Proposed replacement: a 15 to 25 per cent domestic gas reservation policy from 2027. (Source: Gas Market Review, December 2025; HFW analysis)

Western Australia has had a 15 per cent domestic reservation since 2006. East coast gas prices tripled after Gladstone opened. Perth prices rose 22 per cent. (Source: DCCEEW; ACCC historical data)

The policy that works already exists. It is not applied where 80 per cent of Australians live.

The circular dependency

Australia exports 96 per cent of its own crude oil. Gets it refined in Asia. Buys it back at import prices. (Source: Department of Industry, Science and Resources, “Resources and Energy Quarterly”; ACCC petrol monitoring report 2024-25)

The same companies that closed Australia’s refineries - BP, Shell, ExxonMobil - run LNG export operations. The same countries buying Australian gas - Japan, Korea, Singapore - supply refined fuel back.

During the 2026 crisis the Prime Minister described what the Straits Times reported as a “quid pro quo” arrangement. Keep the gas flowing, get fuel shipments in return. (Source: Straits Times, April 2026)

Australia exports the gas. Japan resells it for profit. Australians pay import prices for fuel made from their own resources. The arrangement is factual. Whether it is a problem depends on whether you think Australia’s terms could be better.

The Other Side

LNG projects in Australia required more than $200 billion in upfront capital investment. Companies bore the exploration and construction risk over 7 to 10 years before any revenue flowed. When Gorgon’s costs tripled, that cost was absorbed by the project partners, not by taxpayers.

The PRRT was designed to let companies recoup their costs before the tax kicks in. That is not a loophole. It is how resource rent taxes work in most jurisdictions. The design reflects a policy choice: encourage investment by sharing the early risk, then tax the upside. The debate is whether the balance has shifted too far toward the companies.

Japan is Australia’s second-largest trading partner and a key security ally in the Indo-Pacific. The energy relationship is not just commercial. Long-term contracts with Japan provided the revenue certainty that enabled the financing of multi-billion-dollar LNG projects. Without those commitments, much of Australia’s LNG infrastructure may not have been built.

The gas industry employs tens of thousands of Australians directly. Regional communities in Queensland, Western Australia, and the Northern Territory depend on gas operations for jobs, services, and local government revenue.

The Way Forward

There are concrete steps that could change the balance:

  • Domestic gas reservation for the east coast. WA’s 15 per cent reservation has kept domestic prices far lower than the east coast. Expanding it east, at 15 to 25 per cent, is the most direct lever available. The Gas Market Review recommended exactly this in December 2025.

  • Apply the PRRT deduction cap to existing projects. The 2023 reform capped deductions at 90 per cent for new projects. Extending it to the major producing projects - Gorgon, Wheatstone, Ichthys, Prelude - would bring forward hundreds of millions in tax revenue that is currently deferred indefinitely.

  • Publish all gas contract terms and royalty payments. Australians cannot assess whether the deals are fair when the terms are confidential. Transparency would allow public scrutiny of the arrangements and inform better policy.

  • A sovereign wealth fund funded by resource royalties. Norway’s Government Pension Fund Global was built from oil and gas revenue. Australia has exported comparable volumes with nothing comparable to show for it. A sovereign fund would convert today’s resource exports into permanent national wealth.

These options are not radical. Qatar, Norway, and Western Australia have already demonstrated that they work.

The May budget test

Treasury is modelling windfall tax options for the May 2026 budget. A 25 per cent export revenue tax could raise $13 to $17 billion a year. (Source: Australia Institute, “Giving Away Gas to 2030,” March 2025; Senate Economics References Committee testimony)

Japan’s ambassador warned against a “bad surprise” in the budget. Japan’s Prime Minister visited Australia to push back. But a coalition of Japanese climate organisations joined the push for the tax. (Source: METI bilateral energy dialogue, 2025; Senate inquiry testimony)

A Senate inquiry is active. Gas company CEOs have been called to give evidence.

The supply glut is coming. Forty per cent more global LNG capacity expected by 2028 from Qatar’s North Field expansion and US LNG builds. (Source: IEA World Energy Outlook, 2025; Rystad Energy)

Australia’s negotiating position shifts as the market changes. The contracts that set these terms were negotiated over many years. Fossil fuel donors contributed $3.98 million to both major parties in a single financial year. (Source: AEC disclosure data, analysed in The Untold Truth, “The Donation Pipeline”)

Sources

Royalties and tax data

LNG contracts and arbitrage

East coast gas price cap

Circular dependency and fuel security

Budget and policy

This is part of a series investigating Australia’s fuel security crisis. The refinery closures, political donations, debt loading, and the fuel diplomacy trip are examined in separate stories. The Australian Petroleum Production and Exploration Association (APPEA) has previously defended the industry’s tax contributions, stating that LNG projects pay royalties, corporate tax, and PRRT in accordance with the law. Chevron, Woodside, Santos, Shell, and the Australian government were not contacted for comment prior to publication.

The Untold Truth. Independent. No sponsors. No bullshit.

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