Australia releases Budget 2021

Following Australia's Budget announcement yesterday, please find a commentary below by Wood Mackenzie experts.

On energy transition, Asia Pacific Head of Markets and Transitions, Prakash Sharma said: "Rising commodity prices trims the budget deficit by approximately 25% for the current fiscal year. 

"It’s a clear sign that trillions invested in COVID recovery initiatives globally since last year are driving demand for energy and natural resources, benefiting resource dependent nations such as Australia.

"The budget confirms government's mantra on ‘technology over taxes’ to transition towards a lower emissions economy. The A$600 million federal funding support on carbon capture, utilisation and storage (CCUS), hydrogen projects and soil farming projects will facilitate commercialisation of early-stage technologies.

"Australia has huge potential to develop carbon mitigation and adaptation hubs to serve its domestic and overseas trade partners. We expect the policy momentum to continue in the run up to the COP26 meeting in Glasgow in November."

On upstream, Research Analyst, Shaun Brady said: “The government has clearly underscored its continued commitment to a gas-fired recovery in this budget, which is good news for onshore players. The budget includes A$58.6 million for gas infrastructure projects, and A$173.6 million for road upgrades in the Northern Territory which will support exploration and appraisal activity in the frontier Beetaloo basin.

“The temporary decommissioning levy to be imposed on offshore producers to cover decommissioning costs for the Northern Endeavour and Laminaria/Corallina fields will provoke a strong response from the industry. The policy is still light on detail, with the exact costs and terms still to be negotiated between the government and industry. Depending on how the levy is designed, it is likely the bigger Australian producers will bear the brunt.

"What could be more concerning for producers will be the precedent this may set - will Australian producers be held to account in the future if another player encounters financial difficulties and can't meet its commitments?"