“I am pleased that officials are listening and are supportive of most of the changes that we have been seeking,” said newly-elected Pepanz chairman Chris Hall, who replaced Swift Energy New Zealand president Alan Cunningham.

“The changes are required in order to remove anomalies . . . to put the petroleum industry on a level footing with others.”

The Treasury and Inland Revenue Department on Monday released its ‘Suggested Changes to the Petroleum Mining Expenditure Tax Rules’ discussion paper and called for industry submissions by January 17.

Their suggested changes include allowing:

• deductions for all development expenditure to occur from when that expenditure is incurred. Currently, offshore development costs are deductible when that expenditure is incurred but onshore costs are deductible only from when commercial production starts;

• amortisation of development expenditure under the current seven-year straight-line method or a new depletion method;

• deductions for production expenditure when that expenditure fails to produce an income earning asset;

• GST input tax credits on the costs of restoration associated with a past taxable supply.

Hall said the changes were important and necessary if New Zealand was to be competitive in attracting exploration investment.

“We suffer the tyranny of distance, are perceived to be gas rather than oil prospective and have a low gas price by international standards,” he said.

“Therefore, we need a very good regulatory environment, including taxation, to help provide a balance when companies are making choices about where to invest their exploration dollars.”

However, Hall said Pepanz remained “deeply concerned” about aspects of the New Zealand Energy Strategy, which bans new baseload gas-fired power stations for 10 years, and the Emissions Trading Scheme, which is likely to impose a carbon charge of about $NZ25 per tonne on electricity produced from gas or coal from 2010.

“These proposed taxation changes are an important step but we hope those other initiatives [the NZES and ETS] are not pushed through in their proposed form,” he said.

“Otherwise the benefits of the tax changes will be more than undone.”