Shell Warns Australian Gas Export Controls Could Deter Investment

Shell issued a warning on Tuesday regarding a proposal in Australia that aims to increase the amount of export gas directed into the domestic market. The company expressed concerns that such measures could potentially discourage investment and worsen shortages.

As the country gears up for its May 3 general election, energy has emerged as a key campaign issue. The conservative Liberal-National coalition has made promises to lower power bills and address an impending gas shortage on the east coast through the implementation of a gas reservation scheme.

Cecile Wake, Chair of Shell Australia, voiced skepticism about the effectiveness of export controls in addressing consumer prices. She emphasized that such measures may not significantly impact pricing and could have negative consequences on the market.

According to Wake, “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.” She cautioned that diverting gas supply through export controls could hinder investment and exacerbate existing challenges in the industry.

Although Australia produces more gas than its domestic needs, a significant portion of the supply is allocated for export. Concerns have been raised by the competition regulator about a potential gas shortage on the east coast by 2027.

The opposition leader of the Coalition, Peter Dutton, has proposed directing an additional 10% to 20% of gas exports into the domestic market if his party is elected. Penalties would be imposed for non-compliance, and the extra supply would be sourced from uncontracted gas available on international spot markets.

On the other hand, the ruling Labor party has been emphasizing renewable energy solutions. However, Prime Minister Anthony Albanese has indicated a willingness to use emergency powers to mandate gas producers to redirect supply in the event of a shortage.

Wake criticized the current state of the energy policy debate in Australia, describing it as “ideologically polarized and politicized.” She urged the government to focus on policies that encourage investment rather than redistributing limited resources.

Instead of simply reshuffling existing resources, Wake suggested a focus on expanding the overall supply to benefit all stakeholders in the market.

(Source: Reuters – Reporting by Christine Chen in Sydney; Editing by Richard Chang)