economic contribution report for year ended 31 December 2016

Transcription

1 fact sheet economic contribution report for year ended 31 chevron australia holdings foreword Chevron is one of the world s leading integrated energy companies and has been operating in Australia for more than 60 years. Chevron Australia is leading the development of the Gorgon and Wheatstone natural gas projects, which represent an investment of $80-plus billion 1 and are creating enduring economic benefits on a scale never before seen in Australia. Gorgon and Wheatstone are delivering a range of benefits to Western Australia and the broader nation 1, including: $60b in local content, across 1000 contracts 600 Australian companies supported during construction 19,000 construction jobs created At full capacity, Gorgon and Wheatstone will have the capacity to produce 500TJ/d of domgas, around 50 per cent of current domgas supply in WA. Chevron is committed to paying its fair share of taxes. Since 2009, Chevron Australia has paid around $4.5b in state and federal taxes and royalties. After reaching full production, forecasts show Chevron Australia will pay $2b to $3b a year in federal and state taxes and royalties by the early to mid 2020s. Our annual tax payments will increase significantly when Chevron Australia commences Petroleum Resource Rent Tax (PRRT) payments, expected between 2029 and the mid 2030s. Chevron Australia expects to pay between $60b and $140b of PRRT over the life of the Gorgon and Wheatstone projects subject to a number of price and other assumptions. In approaching our tax obligations, we seek to comply with the letter and the spirit of the law, aligned with our stringent global code of business ethics. Our philosophy is to be open and transparent in our engagement with the Australian Taxation Office (ATO). Where possible, we seek early engagement on significant, complex or uncertain matters across all facets of tax law. International tax law is highly complicated, with many areas of the law still unsettled. Accordingly, there will be times when tax matters cannot be resolved directly with the ATO, such as our recent debt financing litigation. The Australian community can remain confident it will reap a range of benefits from Chevron Australia s major LNG and domestic gas projects for decades to come. And with Chevron s plans for billions of dollars of ongoing investments in Australia, our contributions will continue to grow through local jobs, local contracts, and billions of dollars in tax revenues. From spent A$60 billion+ on Australian goods and services from Gorgon and Wheatstone that s19,000 workers directly from Gorgon and Wheatstone $250million to critical infrastructure associated with Wheatstone Project in Onslow From estimated to contribute A$1 trillion to Australia s GDP 150,000 full time equivalent job years $338 $338billion to Federal revenue Source: ACIL Allen 1 Represents 100% total project investment 1

2 investment in Australia Chevron Australia has delivered direct and indirect economic benefits to the Australian economy during the period 2009 to : More than $60 billion has been committed to Australian goods and services to develop the Gorgon and Wheatstone Projects. 1 Almost 1000 contracts have been awarded to 600 Australian companies to develop the Gorgon and Wheatstone Projects. 1 Almost 19,000 workers have been directly employed. 1 Paid $4.5 billion in Australian taxes. More than $1 billion has been invested in research and development in Australia. 1 More than $53 million has been invested into universities and research institutes to help build local academic excellence and research capability. 1 Almost $300 million has been committed to community investments, including $250 million to critical and social infrastructure in Onslow associated with the Wheatstone Project. 1 Nearly $1.6 billion has been spent on exploration activities in Australia between 2009 and 2014, resulting in a record 25+ offshore discoveries. Chevron Australia will seek to deliver significant long-term direct and indirect economic benefits to the Australian economy. According to a study by ACIL Allen, over the period 2009 to 2040, these include 1 : Almost 150,000 full time equivalent job years in Australia, nearly 5000 per year. $338 billion to Federal Government revenue. More than $320 billion added to real incomes in Australia, around $10 billion per year. The Gorgon and Wheatstone Projects have the capacity to produce 500TJ/d of domestic gas (domgas), around 50 per cent of current domgas supply in Western Australia. taxes paid across the lifecycle of major projects Major oil and gas projects operate at a loss for much of their economic lives, particularly in the investment and build-up stages. Chevron Australia has invested billions of dollars upfront in exploring the Carnarvon Basin (offshore WA) and developing the Gorgon and Wheatstone gas projects on seismic surveys, exploration drilling, and the construction of the subsea and LNG plant infrastructure. During this period, the projects have no revenue, but, only costs. For example, the Gorgon gas field was discovered in 1980 and the LNG project was sanctioned in The first LNG cargo was not exported until. Over the 37 years since first discovery, Chevron Australia has spent billions, but without profit, no income tax nor PRRT is payable on Gorgon. However, a range of other taxes were paid during construction of both Gorgon and Wheatstone. As noted, Chevron Australia has paid $4.5b in federal and state taxes and royalties since More than $1 trillion to the Gross Domestic Product (GDP) of Australia, nearly $32 billion per year. Acquire Explore & Evaluate Develop Ramp-up Full Production Decommission Permit bidding or acquisition costs Operating & capital expenditure Operating & significant capital expenditure Operating expenditure Production ramp-up Profit Operating expenditure Full production Decommissioning expenditure GST revenue generated from amounts spent with Australian suppliers GST revenue generated from amounts spent with Australian suppliers Customs duty on imported capital equipment GST revenue Interest withholding tax (WHT) WHT GST revenue Income tax PRRT Payroll WHT GST revenue GST revenue generated from amounts spent with Australian suppliers 1 Represents 100% total project investment 2

3 chevron s current tax contribution Since 2009, Chevron Australia has paid around $4.5b in federal and state taxes, as shown in the below chart: Chevron Australia taxes and royalties paid 2009 to Tax/Royalty 2009 to 2015 (A$ Millions) (A$ Millions) Total (A$ Millions) Income Tax Fringe Benefits Tax Royalties 1, ,751 Excise Payroll Tax Interest Withholding Tax Foreign Resident Withholding Tax Royalty Withholding Tax chevron s future PRRT contribution PRRT is a super-profits tax. It is deliberately designed to allow major projects to recoup their capital investments. After that time, PRRT is then payable at a rate of 40%. This is on top of income tax making for an effective tax rate of 58%. Based on a range of price and other assumptions, Chevron Australia expects to first pay PRRT somewhere between 2029 and the mid 2030s and expects to pay between $60b and $140b over the life of the projects. This forecast is consistent with the findings of the Government s Callaghan Review, which as shown in the graph below forecast a significant boost in PRRT revenues from the 2020s. The review found also found the PRRT remains the preferred way to achieve a fair return to the community for the extraction of petroleum resources without discouraging investment. GST Denied Input Tax Credits Total 4, ,522 chevron s future income tax and royalty contribution Chevron Australia commissioned ACIL Allen to undertake an independent study into the economic contribution from Chevron s activities in Australia. ACIL Allen s report, based on 2015 parameters, found Chevron Australia will pay $2 billion to $3 billion a year in income tax and royalties after Gorgon and Wheatstone are in full production. These figures do not include PRRT, which are even more substantial. 3,500 $ million 3,000 2,500 2,000 1,500 1, CHEVRON DIRECT TAXATION AND ROYALTY PAYMENT ESTIMATES BY TAX Note: Taxation payments are estimates based on ACIL Allen s forecast of exchange rates and oil prices. All values expressed in real dollars. Source: ACIL Allen Consulting our approach to tax Source: Petroleum Resource Rent Tax Review tax policy, strategy and governance Chevron Australia s cross border dealings must not only comply with domestic Australian law but also international tax laws and principles. In approaching our tax obligations, we comply with the letter and the spirit of the law, in-line with our stringent global code of business ethics. Australia has robust but complex and evolving tax laws. This complexity and dynamic nature of the law sometimes means the law is not entirely clear and the ATO may have differing views. Our philosophy is to be open and transparent in our 3

4 engagement with the ATO. The spectrum of our engagement ranges from compliance reviews, audits and disputes. We seek advance rulings on complex and uncertain tax matters, as well as contributing to the development of relevant public rulings and interpretive guidance. Chevron Australia is vitally interested in tax policy that ensures certainty and fairness for our significant, long-term investments in Australia. Chevron Australia is contributing to the current broader tax reform process in Australia through its membership of the Australian Petroleum Production & Exploration Association, the Corporate Tax Association and the Business Council of Australia. Chevron Australia is subject to the US Sarbanes-Oxley laws that require us to have strong governance processes in place regarding our tax positions. Our governance processes are subject to both internal audit and audit by PricewaterhouseCoopers, our external auditor, on an annual basis. Information disclosed by the ATO The Commissioner of Taxation recently disclosed the following details in respect of Chevron Australia s income tax return for the year ended (in lieu of the 30 June income year). Total Income $2,142,255,410 Taxable Income $0 Income Tax Payable $0 However, Chevron Australia made an accounting loss before tax of A$250 million for the year ended While Chevron Australia does earn some revenues, that revenue is exceeded by operating costs, depreciation and other deductible outlays such as R&D. Income tax is levied on profit rather than revenue. Total Income as disclosed by the ATO represents Chevron Australia s gross income for accounting purposes. That is, income (revenue) before any expenses are taken into account. Total income is not an indicator of the real, economic or taxable profits of any organisation. Financial statement disclosures Profit/(Loss) before income tax expense (US millions) 2015 (US millions) (153) (173) Prima facie tax at 30% Non-temporary differences 165 (45) Temporary Differences (179) 326 Other (421) 5 Income tax (expense) / benefit (389) 338 Effective tax rate Chevron Australia s corporate tax rate (not including royalties or other taxes) has been calculated using the following formula: Income Tax Paid Accounting Profit for the Income Tax Consolidated Group This results in the following effective corporate tax rate over the last five years: % 8% 0% 0% 0% The above effective tax rates are consistent with the life cycle of our projects. Corporate income tax is calculated on profit and not revenue. The Gorgon Project has only just started deriving revenue and the Wheatstone Project has not yet started production. Chevron publishes the effective tax rate for its global operations in its annual report (please refer to Chevron Australia prepares General Purpose Financial Statements annually. These are available publicly through the Australian Securities and Investment Commission. Selected information from the Annual Report for the year ended 31, which is relevant to this fact sheet, has been included in the Appendix. 4

5 appendix income tax expense a) Income tax expense non current assets deferred tax assets The balance comprises temporary differences attributable to: Current Tax Current Tax on profits for the year $ 2,105 $ (136) Adjustments for current tax of prior periods $ (76,739) $ 39,741 Total current tax (expense)/ benefit $ (74,634) $ 39,605 Deferred Tax Current Deferred Tax $ (165,989) $ 440,154 Adjustments for deferred tax of prior periods $ (148,213) $ (141,691) Total deferred tax (expense)/benefit $ (314,202) $ 298,463 Total Income Tax (Expense) / Benefit $ (388,836) $ 338,068 Deferred income tax (revenue)/expenses included in income tax expense comprises: (Decrease) / Increase in deferred tax assets (note 13) $ (131,105) $ 427,451 Increase in deferred tax liabilities (note 17) $ (183,097) $ (128,988) $ (314,202) $ 298,463 b) Numerical reconciliation of income tax expense to prima facie tax payable Loss before income tax expense $ (152,600) $ (173,193) Tax at the Australian tax rate of 30% ( %) $ 45,780 $ 51,958 Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Adjustment in respect of prior periods $ (224,952) $ (101,950) Non assessable income $ 4,467 - Non deductible expenditure $ (2,597) $ (77,267) Foreign exchange deductible in tax functional currency $ 7,469 - Foreign exchange deductible in accounting functional currency $ 154,254 - Foreign exchange of current taxable income $ 16,018 - Foreign exchange (loss) / gain due to translation of PRRT tax base Foreign exchange (loss) / gain due to translation of tax base $ (177,350) - $ (243,402) $ 5,497 Resource Rent Royalty $ 11,306 $ 14,739 Petroleum Resource Rent Tax $ 46,245 $ 427,451 Research & development expenditure $ 7,438 $ 9,195 Sundry items $ (33,512) $ 8,445 Income tax (expense) / benefit $ (388,836) $ 338,068 Carry forward losses $ 1,581,433 $ 811,907 PRRT $ 636,635 $ 767,740 Provision for rehabilitation $ 209,152 $ 165,383 Employee benefits $ 22,833 $ 21,987 Retirement benefit obligations - $ 6,953 Resource Rent Royalty $ 14,641 $ 4,835 Other - $ 3,105 Unrealised foreign exchange gains $ 3,882 - Embedded derivatives - $ 80 Set off of deferred tax liabilities pursuant to set off provisions (note 17) $ 2,468,576 $ 1,781,990 $ (1,831,941) $ (1,014,250) Net deferred tax assets $ 636,635 $ 767,740 Movements: Opening balance at 1 January $ 767,740 $ 402,193 (Charged) / credited to the statement of profit and loss (note 7(a)) $ (131,105) $ 427,451 Currency translation differences - $ (61,904) Closing balance at 31 $ 636,635 $ 767,740 non current liabilities deferred tax assets The balance comprises temporary differences attributable to: Property, plant and equipment $ 824,740 $ 2,253,267 Rehabilitation asset $ 53,807 $ 11,680 Capitalised borrowing costs $ 1,773,318 $ 1,481,076 Exploration expenditure $ 530,692 $ 440,914 Unrealised foreign exchange losses - $ 30,639 Warehouse stock $ 9,944 $ 6,921 Retirement benefit obligation $ Other $ 34,234 - Deferred tax asset balance off setting deferred tax liabilities (note 13) $ 5,227,626 $ 4,224,497 $ (1,831,941) $ (1,014,250) c) Amounts recognised directly in other comprehensive income Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss. Deferred tax on actuarial gains recognised through other comprehensive income $ (2,341) - $ (2,341) - Net deferred tax liabilities $ 3,395,685 $ 3,210,247 Movements Opening balance at 1 January $ 3,210,247 $ 3,441,328 Charged to the income statement (note 7a) $ 183,097 $ 128,988 Charged to other comprehensive income (note 7c) $ 2,341 - Currency translation differences - $ (360,069) Closing balance at 31 $ 3,395,685 $ 3,210,247 5

6 appendix related parties (a) Parent entities The ultimate parent entity is Chevron Corporation, a company incorporated in the United States of America, which at 31 indirectly owned 100% of the issued shares of Chevron Australia Holdings Pty Ltd (2015:100%). The immediate parent entity is Chevron Australia Petroleum Company, a company incorporated in the United States of America, which at 31 owned 100% of the issued shares of Chevron Australia Holdings Pty Ltd (2015:100%) (b) Subsidiaries Interests in subsidiaries are set out in note 29. (c) Key management personnel Disclosure relating to key management personnel are set out in note 25. (d) Transactions with other related parties (f) Terms and conditions All other related party transactions were made on normal commercial terms and conditions and at market rates. There is no allowance account for impaired receivables in relation to any outstanding balances, and no expense has been recognised in respect of impaired receivables due from related parties. (g) Loans to/from related parties Loans from parent Beginning of the year $ 29,985,083 $ 29,648,044 Loans advanced $ 3,844,518 $ 2,082,401 Loan repayments made $ (3,844,518) - Interest charged $ 1,442,701 $ 1,502,151 Interest paid - - Movements due to foreign exchange $ (539,305) $ (3,247,513) End of year $ 30,888,479 $ 29,985,083 Sale of goods to other related parties $ 426,146 $ 739,174 Interest charged on borrowings by Chevron Australia Petroleum Company $ 1,546,718 $ 1,382,099 Recharges to other related parties $ 24,841 $ 79,170 Additional shares issued to Chevron Australia Petroleum Company $ 4,288,252 $ 7,209,288 Purchased product of hydrocarbons $ 51,474 - (e) Outstanding balances The following balances are outstanding at the end of the reporting period in relation to transactions with related parties: Current receivables (sales of goods and services) Other related parties $ 102,837 $ 69,004 Current payables Other related parties $ 98,807 $ 182,341 There is no security, interest charged or formal repayment terms associated with the current receivables and liabilities above. 6