Royalties and Fees

Onshore Royalties

The Crown retains ownership of petroleum and other regulated resources contained onshore in the ground in South Australia.

Ownership of the regulated substance transfers to a licensee upon recovery of the regulated substance on which a royalty is levied. This royalty is in addition to the Commonwealth, State and Local Government taxation regimes to which all companies and individuals are subject.

Royalties are calculated as a proportion of the net sales value of regulated substance at the actual point of sale to an arms length purchaser after deduction from the gross sale value of certain expenses. Deductible expenses are those directly relating to treating, processing or refining the regulated substance post-wellhead, or in conveying the regulated substance to the point of delivery to the purchaser (the wellhead value). Pre-wellhead costs such as those incurred in exploration, drilling or recovery activities cannot be claimed for the purposes of determining royalty.

This type of royalty system is widely accepted in the "petroleum" industry and is reasonably easy to administer for both companies and government.

Summary of Royalty Provisions

Regulated Substance

  • Royalty is payable at the rate of 10% of the net post-wellhead sales value (wellhead value) of petroleum recovered at the wellhead.
  • Wellhead means the casing head and includes any casing hanger or spool, or tubing hanger, and any flow control equipment up to and including the wing valves.
  • The wellhead value of petroleum recovered is calculated by deducting from the arms length gross sales value of the petroleum, certain post-wellhead costs.
  • 'Post-wellhead costs' include such operating and capital costs that directly relate to treating, processing or refining the petroleum post-wellhead, or in conveying the petroleum to the point of delivery to the purchaser and can include:
    • An allowance for depreciation of post-wellhead capital assets situated within a production unit.
    • An allowance for interest on approved post-wellhead capital assets.
    • An allowance for the net cost of rehabilitation and abandonment of well sites.
    • The value of petroleum used in approved operations.
  • Capital expenditure relating to allowable post-wellhead activities is depreciated on a straight line basis as agreed over the life of the field or up to a maximum of 10 years, whichever is the lesser

 Geothermal Energy

  • Royalty on Geothermal Energy is 2.5% of the wellhead value of the geothermal energy.
  • The value at the well head of geothermal energy is a value calculated by subtracting from the price (exclusive of any GST component) that could reasonably be realised on sale of the energy to a genuine purchaser at arms length from the producer all reasonable expenses (exclusive of any GST component) reasonably incurred by the producer in getting the energy to the point of delivery to the purchaser.
  • The value at the well head of a regulated substance or geothermal energy is to be assessed by the Minister.
  • The Minister may, on application by the producer, or on the Minister's own initiative, review and revise an earlier assessment of the value at the well head of a regulated substance or geothermal energy.

Requirement to Pay Royalties

The Licensees shall pay royalty in respect of all regulated resource produced from land comprised in the Licence ... other than substances described in Extract from the Petroleum Act 2000: Section 43 (3)(a).


Offshore Royalties

Details about royalties and fees for petroleum and other regulated substances recovered from offshore South Australia can be found on the Australian Government Department of Industry, Tourism and Resources site (external site).