THE good fortunes of the WA oil and gas industry, a saviour of the resource industry in the past two years and a cash cow to the WA Government, may be drawing to an end, putting in question the State’s ability to maintain its AAA rating.
THE good fortunes of the WA oil and gas industry, a saviour of the resource industry in the past two years and a cash cow to the WA Government, may be drawing to an end, putting in question the State’s ability to maintain its AAA rating.
The Australian Bureau of Agriculture and Resource Economics is forecasting crude oil and refined petroleum exports will be as much as 30 per cent lower in 2001-02 compared with the previous year.
In the wake of the September 11 attacks on the US, one of the most affected petroleum products was jet fuel, which accounts for approximately 8.5 per cent of consumption in the developed world. Airline cutbacks in response to the fall-off in demand for air travel led to a significant decline, particularly in the United States.
The 2002 calender year is set to be an even more difficult trading year for WA’s oil and gas industry. ABARE expects prices for crude oil to fall to an average of $US17 a barrel – a 26 per cent decline from 2001.
The WA Treasury is forecasting a more optimistic average price of $US20 a barrel to be achieved till mid 2003.
Export figures released by the WA Treasury this week show that, in the three months ending November 30, petroleum exports had fallen by $260 million, or 18 per cent, to $1.16 billion compared with the corresponding period in 2000.
The decline in oil prices caused the WA Treasury to change its budget estimates. In the Government’s mid-year financial projection statements the Government revised estimated royalties to be $95 million lower than the budget forecast, including a $75 million decline in North West Shelf royalties.
Royalties coming from the North West Shelf have been revised downward to just $340 million for the current financial year compared with original budget estimates of $415 and well down on 2000-01 revenue of $466 million.
But the WA Government’s projections are based on the optimistic assumption of an average world oil price of $US20 a barrel, well above ABARE’s estimate of $US17 a barrel, as well as an assumed average exchange rate of 0.515 to the United States dollar.
The ABARE estimates throw doubt on Government forecasts. The total annual mining revenue estimate varies by around $17 million for each 1.0 cent change in the exchange rate, while annual petroleum royalty estimates varies by around $19 million for each $US1 variation in the price of a barrel of oil.
If ABARE’s pessimistic expectations prove correct, and the oil price does go lower, the WA Government may be receiving $60 million less in North West Shelf royalties than revised estimates indicated – assuming that the Australian dollar holds up.
BankWest economist Alan Langford said the downward spiral in oil prices could have a dramatic effect on the WA Government’s revenue base.
“It certainly is not going to help an already deteriorating budgetary position. Whether it is enough to affect our AAA rating is the question,” Mr Langford said.
He said business investment was likely to improve in the next year, providing a potential lifeline to the WA Government and the economy.
In the short-term the Government has called on Government trading enterprises to find an additional $35 million in dividends including an additional $20 million from Western Power.
Whether the additional money will be paid is up to the discretion of the Western Power board, which is due to meet in February.
If the money is not forthcoming, the revised expected surplus of $9.6 million from the original projected operating surplus of $51.6 million made in September looks increasingly unachievable.
Despite continuing low oil prices the major oil companies this week pushed fuel prices at the bowsers by up to 12 cents a litre – a move the Government said was unjustified.
“The oil majors have increased fuel prices despite gradual falls in the maximum wholesale price over the last month,” Comsumer Protection Comm-issioner Pat Walker said.
“He said the maximum wholesale price for tommorrow was 75.7 cents per litre so paying up to 88.9 cents per litre for no apparent reason was unjustified given that retail margins were normally only 2.5-3 cents a litre.
He said there was no apparent reason for the jump which will push prices as high as 88.9 cents per litre.
The Australian Bureau of Agriculture and Resource Economics is forecasting crude oil and refined petroleum exports will be as much as 30 per cent lower in 2001-02 compared with the previous year.
In the wake of the September 11 attacks on the US, one of the most affected petroleum products was jet fuel, which accounts for approximately 8.5 per cent of consumption in the developed world. Airline cutbacks in response to the fall-off in demand for air travel led to a significant decline, particularly in the United States.
The 2002 calender year is set to be an even more difficult trading year for WA’s oil and gas industry. ABARE expects prices for crude oil to fall to an average of $US17 a barrel – a 26 per cent decline from 2001.
The WA Treasury is forecasting a more optimistic average price of $US20 a barrel to be achieved till mid 2003.
Export figures released by the WA Treasury this week show that, in the three months ending November 30, petroleum exports had fallen by $260 million, or 18 per cent, to $1.16 billion compared with the corresponding period in 2000.
The decline in oil prices caused the WA Treasury to change its budget estimates. In the Government’s mid-year financial projection statements the Government revised estimated royalties to be $95 million lower than the budget forecast, including a $75 million decline in North West Shelf royalties.
Royalties coming from the North West Shelf have been revised downward to just $340 million for the current financial year compared with original budget estimates of $415 and well down on 2000-01 revenue of $466 million.
But the WA Government’s projections are based on the optimistic assumption of an average world oil price of $US20 a barrel, well above ABARE’s estimate of $US17 a barrel, as well as an assumed average exchange rate of 0.515 to the United States dollar.
The ABARE estimates throw doubt on Government forecasts. The total annual mining revenue estimate varies by around $17 million for each 1.0 cent change in the exchange rate, while annual petroleum royalty estimates varies by around $19 million for each $US1 variation in the price of a barrel of oil.
If ABARE’s pessimistic expectations prove correct, and the oil price does go lower, the WA Government may be receiving $60 million less in North West Shelf royalties than revised estimates indicated – assuming that the Australian dollar holds up.
BankWest economist Alan Langford said the downward spiral in oil prices could have a dramatic effect on the WA Government’s revenue base.
“It certainly is not going to help an already deteriorating budgetary position. Whether it is enough to affect our AAA rating is the question,” Mr Langford said.
He said business investment was likely to improve in the next year, providing a potential lifeline to the WA Government and the economy.
In the short-term the Government has called on Government trading enterprises to find an additional $35 million in dividends including an additional $20 million from Western Power.
Whether the additional money will be paid is up to the discretion of the Western Power board, which is due to meet in February.
If the money is not forthcoming, the revised expected surplus of $9.6 million from the original projected operating surplus of $51.6 million made in September looks increasingly unachievable.
Despite continuing low oil prices the major oil companies this week pushed fuel prices at the bowsers by up to 12 cents a litre – a move the Government said was unjustified.
“The oil majors have increased fuel prices despite gradual falls in the maximum wholesale price over the last month,” Comsumer Protection Comm-issioner Pat Walker said.
“He said the maximum wholesale price for tommorrow was 75.7 cents per litre so paying up to 88.9 cents per litre for no apparent reason was unjustified given that retail margins were normally only 2.5-3 cents a litre.
He said there was no apparent reason for the jump which will push prices as high as 88.9 cents per litre.
