DMP clarifies position over NWS royalty deduction claims

The Australian National Audit Office (ANAO) has tabled a report in the Australian Parliament that makes a number of findings and recommendations regarding the collection of North West Shelf royalty revenue.

The ANAO was focussed on assessing whether the federal Department of Industry, Innovation and Science (DIIS) is effectively and efficiently administering the collection of NWS royalty revenue.

DMP collects the NWS royalty revenue on behalf of the Australian Government, who then pays a portion (more than 60%) to the Western Australian Government.

Because the ANAO audit was focussed on DIIS, and not DMP, consultation with DMP was late in the process and limited.

DMP’s General Manager Royalties David Norris said the department’s processes are robust and comprehensive, and the Australian and Western Australian Governments can be confident that royalties are being accurately calculated and collected.

DMP’s audit program for the NWS project includes detailed annual reviews of production volumes, sales revenues and deductions claimed by the operator, as well as independent third party verification.

In 2015 DMP commissioned an independent analysis of the royalty deductions claimed by the NWS operator for the 2014 calendar year. The Ernst and Young analysis was comprehensive and made six findings relating to various operating and capital cost deductions.

DMP has addressed all six findings, resulting in the collection of an additional $8.6 million going back six years to 2008. To put this adjustment in context, over the same six-year period, DMP collected $10.5 billion in royalties for the NWS project.

The 2015 Ernst and Young analysis confirmed that the cost deductions being claimed by the NWS operator are consistent with the Australian and State government approvals and agreements for the project. The analysis also provided assurance that DMP’s audit program is robust and the verification processes are working effectively.

The four recommendations in the ANAO report are directed at DIIS improving its documentation and administration of the NWS royalty processes.

“DMP welcomes feedback from all reviews and audits, and looks forward to working with the Department of Industry, Innovation and Science to further strengthen the administration of the NWS royalty processes,” Mr Norris said.