Volume model to calculate petroleum royalty

Royalty is calculated by applying a prescribed rate to the volume of liable petroleum produced during a return period.

Different rates apply to the 4 classes of petroleum:

• domestic gas
• supply gas
• project gas
• liquid petroleum.

Petroleum is produced when it is released or recovered to ground level from a natural underground reservoir. Your petroleum royalty liability is based on the volume of liable petroleum produced in a return period.

The volume model is used for calculating petroleum royalty. Under this model, you need to determine:

• the total liable volume of petroleum produced during the period
• the classification (e.g. domestic gas, supply gas, project gas or liquid petroleum)
• the royalty rate that applies to each class of petroleum.

These position papers will help you to determine your royalty liability under the volume model:

• Classification of petroleum
• Measurement of petroleum
• Determination of petroleum royalty rates.

Swap arrangements

Swap arrangements may be relevant for determining the classification of gas and average sales price for petroleum.

See the Commissioner of State Revenue’s determinations on swap arrangements from:

• 1 September 2021
• 1 October 2020 to 31 August 2021.

Benchmark elections

When calculating your petroleum royalty rates under the volume model, you may elect in your return to use the benchmark price for a particular petroleum type as the average sales price.

Making a benchmark election

You may elect for the average sales price for a particular petroleum type to be the benchmark price (rather than using relevant sales) in this and subsequent royalty return periods.

This benchmark election will apply in relation to that petroleum type for:

• this royalty return period
• each subsequent royalty return period unless the Commissioner of State Revenue ends the election.

Elections are to be made separately for each petroleum type. You may make an election for some or all petroleum types.

Ending a benchmark election

To end a benchmark election, you must complete an application to end benchmark election (Form R2.10). The Commissioner will consider the reasons why you want to end the election as well as the impact on public revenue.

Also consider…

• Find out about petroleum and gas tenures.
• Read about penalties and interest.
• See the transitional arrangements for petroleum royalty.
• Learn about lodging royalty returns.
• Read the petroleum guide for QRO Online.