Shell Warns Against Dutton’s Gas Export Reservation Plan Amid Investment Concerns
Australia's opposition leader faces backlash as Shell cautions that proposed export curbs may hinder domestic gas availability and investment.
Shell, a leading global energy company, has issued a warning regarding Opposition Leader Peter Dutton's proposal to impose significant export curbs on Queensland's liquefied natural gas (LNG) producers.
The initiative, designed to retain more gas supplies domestically, is expected to adversely affect investment in new projects and may not effectively increase local gas availability, according to Shell Australia's chair, Cecile Wake.
The Coalition has introduced an east-coast gas reservation plan aimed at preventing gas exports to Asia to address rising energy prices and potential gas shortages in Victoria and New South Wales (NSW) later this decade, as existing fields in the Bass Strait begin to deplete.
Experts and industry leaders, however, have quickly questioned the practicality of this approach, suggesting it may not significantly influence gas and electricity prices.
Wake, speaking at the Australian Domestic Gas Outlook forum in Sydney, emphasized that mandating a domestic gas-reserve scheme could exacerbate the supply challenges in NSW and Victoria.
She stated, "The fact that the easiest lever the federal government now has to solve the southern gas problem is export controls is not a reason to pull that lever harder," arguing that the plan would lead to a redistribution of supplies rather than an increase.
Shell operates one of Queensland's primary LNG joint ventures, Queensland Curtis LNG (QCLNG), which primarily exports most of its gas under long-term contracts to Asian markets.
Approximately 15% of Shell's gas is allocated for domestic consumption on the east coast.
The suggested reservation plan would compel QCLNG and the Origin Energy-supported Australia Pacific LNG (APLNG) to reserve between 50 and 100 petajoules of uncontracted gas annually for Australian buyers, potentially covering an additional 20% of the east-coast demand.
Dutton argued that the plan would reduce wholesale gas prices significantly, from $14 per gigajoule to $10. However, the reality of Australia's gas production costs complicates this assertion.
Historically, gas was produced for less than $4 per gigajoule, but escalating production costs have seen the price rise, with the Australian Energy Market Operator indicating new projects produce gas at wellhead costs ranging from $9.20 to $12.50 per gigajoule, not accounting for transportation expenses.
The specifics of how the Coalition intends to manage export restrictions while ensuring additional gas flows from Queensland to the southern markets remain unclear, particularly given the limitations of existing storage and pipeline infrastructures.
Krishan Pal Birda, vice-president of Australasian oil and gas at Rystad Energy, expressed skepticism, noting that while the proposal might provide short-term relief, it is unlikely to be sustainable due to the inflexible nature of coal seam gas production and pipeline constraints.
The Coalition’s proposal has garnered support from major gas-consuming sectors, including manufacturing, which relies on affordable gas for energy and feedstock.
Manufacturing Australia’s representative, Ben Eade, articulated concerns over current gas prices, insisting that charges exceeding $10 per gigajoule are unsustainable in a resource-rich nation like Australia.
He criticized the logic of exporting surplus gas while facing imminent local shortages and urged a reconsideration of current export practices.
The initiative, designed to retain more gas supplies domestically, is expected to adversely affect investment in new projects and may not effectively increase local gas availability, according to Shell Australia's chair, Cecile Wake.
The Coalition has introduced an east-coast gas reservation plan aimed at preventing gas exports to Asia to address rising energy prices and potential gas shortages in Victoria and New South Wales (NSW) later this decade, as existing fields in the Bass Strait begin to deplete.
Experts and industry leaders, however, have quickly questioned the practicality of this approach, suggesting it may not significantly influence gas and electricity prices.
Wake, speaking at the Australian Domestic Gas Outlook forum in Sydney, emphasized that mandating a domestic gas-reserve scheme could exacerbate the supply challenges in NSW and Victoria.
She stated, "The fact that the easiest lever the federal government now has to solve the southern gas problem is export controls is not a reason to pull that lever harder," arguing that the plan would lead to a redistribution of supplies rather than an increase.
Shell operates one of Queensland's primary LNG joint ventures, Queensland Curtis LNG (QCLNG), which primarily exports most of its gas under long-term contracts to Asian markets.
Approximately 15% of Shell's gas is allocated for domestic consumption on the east coast.
The suggested reservation plan would compel QCLNG and the Origin Energy-supported Australia Pacific LNG (APLNG) to reserve between 50 and 100 petajoules of uncontracted gas annually for Australian buyers, potentially covering an additional 20% of the east-coast demand.
Dutton argued that the plan would reduce wholesale gas prices significantly, from $14 per gigajoule to $10. However, the reality of Australia's gas production costs complicates this assertion.
Historically, gas was produced for less than $4 per gigajoule, but escalating production costs have seen the price rise, with the Australian Energy Market Operator indicating new projects produce gas at wellhead costs ranging from $9.20 to $12.50 per gigajoule, not accounting for transportation expenses.
The specifics of how the Coalition intends to manage export restrictions while ensuring additional gas flows from Queensland to the southern markets remain unclear, particularly given the limitations of existing storage and pipeline infrastructures.
Krishan Pal Birda, vice-president of Australasian oil and gas at Rystad Energy, expressed skepticism, noting that while the proposal might provide short-term relief, it is unlikely to be sustainable due to the inflexible nature of coal seam gas production and pipeline constraints.
The Coalition’s proposal has garnered support from major gas-consuming sectors, including manufacturing, which relies on affordable gas for energy and feedstock.
Manufacturing Australia’s representative, Ben Eade, articulated concerns over current gas prices, insisting that charges exceeding $10 per gigajoule are unsustainable in a resource-rich nation like Australia.
He criticized the logic of exporting surplus gas while facing imminent local shortages and urged a reconsideration of current export practices.
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