"What if you gave your house to a real estate agent and trusted them to sell it and they gave it away to a mate for free - it's that outrageous," Australia Institute principal fellow Mark Ogge told AAP on Monday.

"It's a public asset that's being given away," he said.

The North West Shelf has had a royalties regime locked in for several decades. Some $425 million in gas royalties was collected by the Western Australian government in 2020/21.

But two thirds of offshore gas projects pay almost no royalties to the Western Australian government and no Petroleum Resource Rent Tax (PRRT) to the federal government, an Australia Institute report has found.

Offshore gas is a Commonwealth responsibility so the income Australians could receive would come via the PRRT.

"But it has ridiculously generous deductions for losses and those compound over time," Mr Ogge said.

"Companies are basically banking their losses so that they never pay PRRT.

"Prelude, Gorgon, Wheatstone and Pluto don't pay royalties or any PRRT so that gas is literally being given away for free and that gas belongs to the people of Australia," Mr Ogge said.

Together, those projects make up around two thirds of Western Australia's gas production.

Most LNG is exported, and of the amount consumed in the state, just over half is used for mining and manufacturing not households.

In 2019/20, 47 million tonnes were sold for $27 billion for multinational corporations including Chevron, ExxonMobil, Shell and Woodside, the think tank said.

The report found if the North West Shelf royalty arrangements were extended to all LNG operations, approximately $1.6 billion could have been raised in 2019/20.

This would bring additional WA revenue of $1.06 billion, and $500 million to the Commonwealth.

On top of that tax foregone, taxpayers have been subsidising the industry under successive governments, the report found.

"At the same time we're facing enormous deficits. We've got huge pressures with COVID to deal with the health system and yet the one of our most valuable resources is just being sent overseas when it could pay for these things," Mr Ogge said.

State and federal governments have been contacted for comment.

The report also found the LNG industry is a heavy emitter, employs very few people, and returns little to state coffers despite subsidies and "sweetheart deals" on land use.

Lawmakers engaging with the LNG industry should craft policy that reduces WA's emissions and promotes industries that employ more West Australians, the report says.

Much-hyped hydrogen does not offer a better option, according to critics.

"The emissions from hydrogen made with gas are even greater than burning the gas," Mr Ogge said.

Australian Associated Press