* Audit office estimates underpayment at A$11.6 mln
* NW Shelf says royalty compliance is "robust"
(Adds maximum underpayment, NW Shelf comments)
MELBOURNE Nov 28 The North West Shelf joint
venture, Australia's biggest oil and gas operation, cut
royalties it owed by claiming more than A$5 billion ($3.7
billion) in deductions, some of which weren't valid, over the 18
months to December 2015, a government watchdog said on Monday.
The Australian National Audit Office (ANAO) said government
departments need to take steps to tighten their collection of
royalties from the North West Shelf, which accounts for about a
third of the country's oil and gas output.
The finding comes at a time when oil and gas producers have
been hammered by a slump in prices.
"The Royalty Schedule does not permit all the deductions
currently being claimed," the audit office said in a report
released on Monday.
The North West Shelf joint venture said it cooperated in the
audit and was fully transparent.
"Woodside as operator of the NWS Project has robust
compliance processes with regard to royalty obligations," a
North West Shelf (NWS) spokesperson said in an emailed
The audit office said the joint venture reduced the royalty
payable by taking more than A$5 billion in deductions, including
operating costs, depreciation, cost of capital, crude oil and
condensate excise, processing tariffs and joint venture
Revenue reported from North West Shelf petroleum sales
between July 2014 and December 2015 was A$19.7 billion on which
A$1.9 billion in royalties were due. Of that, about a third went
to the federal government and the rest to the state of Western
The audit office questioned the eligibility of deductions
claimed for the cost of debt and equity funded capital and the
excise paid on crude and condensate.
Royalty underpayments amounted to about A$11.6 million, at
most, it said, based on the incorrect deductions the audit
office had identified, however it added that there may be more.
"Some errors in the claiming of deductions have been
identified, but the available evidence indicates that the
problems are much greater than has yet been quantified," the
Australia's Department of Industry agreed with the audit
office's recommendations for improving royalty collection.
Western Australia's department of mines and petroleum,
however, considered its processes robust and said "the
Commonwealth and State governments can be confident that
royalties are being accurately assessed and collected".
The North West Shelf joint venture is operated by Woodside
Petroleum. Its partners are BHP Billiton
, BP, Chevron Corp, Japan's
Mitsubishi Corp and Mitsui & Co, and Royal
($1 = 1.3385 Australian dollars)
(Reporting by Sonali Paul; Editing by Michael Perry and Joseph