"Under the new arrangements, condensate production from petroleum fields located in the North West Shelf project area and onshore Australia will be subject to the same excise rates as those applicable to petroleum fields discovered after September 18, 1975," the budget papers said.

Under these terms, the top crude oil excise rate, which applies once annual production reaches more than 5 million barrels a year, is 30%.

While the first 30MMbbl of crude produced from a field is exempt from crude oil excise, past production of condensate will contribute towards meeting this threshold before the crude oil excise becomes payable.

Budget papers describe the move, which is expected to add $564 million to government revenue in the next financial year and $2.5 billion over the next four years as "increasing the return to the community from extracting this non-renewable resource, without affecting fuel prices".

Western Australia's Labor Government is also expected to be a big loser with the removal of the exemption, though the Federal Government said it will compensate the state, starting with an initial $80 million this financial year, building to a total of $406 million over four years.