The Turnbull government is facing pressure from the oil and gas industry not to push ahead with changes to reap billions of dollars in tax revenue from the fast-growing LNG industry.
Revenues from the 40 per cent petroleum resource rent tax (PRRT) levied on profits generated from petroleum commodities had halved since 2012/13, while crude oil excise revenues have more than halved.
Treasurer Scott Morrison has asked former Treasury official Michael Callaghan to report by April - just weeks before the federal budget - on ways to ensure the taxes are still operating as they were originally intended and determine why there has been a revenue dive.
Mr Morrison says the review is about improving the integrity of the tax system and ensuring companies are paying the right amount of tax on their Australian activities.
The Australian Petroleum Production and Exploration Association said in its submission to the Callaghan review it does not believe there is a case for any change to the PRRT.
"Any changes that lead to increased imposts under the resource taxation system will damage the ability of Australia to attract projects and thereby diminish the capacity to create sustainable taxation revenue streams for future generations," the association said.
But Mr Callaghan, who received 73 submissions, has also been presented with evidence Australian taxpayers are set to be severely short-changed by multinational firms such as Chevron, Shell, Inpex, ExxonMobil and Total.
The Tax Justice Network says by 2021 Australia's LNG exports will exceed those of Qatar.
But the PRRT will not generate any revenues for decades, while Qatar collects $26.6 billion in LNG royalties.
The network has proposed extending the 10 per cent commonwealth royalty to all current and future offshore oil and gas projects that are otherwise only subject to the PRRT.
Five large LNG offshore projects are only subject to the PRRT, unlike all other gas projects in Australia.
All other oil and gas projects in Australia are subject to state or commonwealth royalties of 10 per cent or higher plus the PRRT.
It's estimated extending the commonwealth royalty regime to the five LNG projects could generate between $30 billion and $45 billion over three decades.
A Reserve Bank analysis published in 2015 concluded the economic benefits to Australia from the LNG boom would be muted by "low employment intensity of LNG production, the high level of foreign ownership and, in the near term, the use of deductions on taxation payments".
The ACTU says it's vital that companies earning significant profits from natural resources pay their fair share of tax.
AAP understands Labor is adopting a wait and see approach, despite strong union support for change.
It is also understood there are concerns within government that higher taxes on gas in the May budget could send mixed messages as the prime minister talks up his energy security credentials.
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