|Friday, 18 February 2011|
OIL Search expects its 2010 full-year effective tax rate to be reduced by 15%, citing tax treatment of its PNG LNG project.
Oil Search’s full-year effective tax rate is expected to be about 35%, compared with the statutory rate of 50% applicable to all oil operations in Papua New Guinea.
The lower rate is primarily due to the once-off restatement of the PNG LNG oil fields’ deferred tax balances. The restatement will be reported as a significant item.
The company says the PNG LNG project will extend the lives of a number of the oil fields and ultimately convert these fields from predominantly oil to gas production.
These fields will move from the tax rate of 50% applicable to oil operations into the gas tax regime of 30% at the time the fields start to sell gas.
This has led to the net credit to deferred income tax expense, reducing the 2010 effective tax rate to 35%.
While the restatement of the deferred balances to the 30% rate is an accounting adjustment, the actual amounts of income tax payable will not change in the near term.
The company’s full-year results are due to be released on February 22.
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