Gas giants claim that Australia's opposition plan to reserve supplies may worsen the shortage
Gas giants around the world said that a proposal made by Australia's coalition of opposition to force producers to divert more gas from exports into the domestic market in an attempt to win votes would discourage investment and not solve the looming gas shortages.
The conservative Liberal-National Coalition has pledged to lower power bills by implementing a gas reservations scheme.
The center-left Labor government led by Prime Minister Anthony Albanese has introduced a cap on wholesale gas prices for 2022 and implemented other regulatory measures and policies to reduce emissions and meet domestic energy requirements.
Shell, ExxonMobil, and Chevron executives in Australia rebuffed the proposal of the coalition at a conference held in Sydney. They argued that more government involvement would hinder the development of the gas supply.
Cecile Wake of Shell Australia who exports gas through the Queensland Curtis project in Queensland said that export controls are not the answer.
She said: "The fact the the federal government has the easiest lever to solve the Southern Gas problem now is export controls is not a good reason to pull this lever harder."
This does not increase the supply, but simply redistributes what is already there. When combined with price caps and market interventions it can hinder investment and exacerbate challenges.
Australia exports more than it consumes. However, its main reserves are in the northwest. This is far away from the southeast, where the majority of people live, and the demand is the highest. The competition regulator warned that eastern states may face a shortage of gas by 2027.
Peter Dutton, the leader of the opposition, has proposed a plan that would force the exporters along the east coast (mainly QCLNG and Australia Pacific Gas operated by ConocoPhillips) to send 10% to 20% extra product to the domestic market. The additional supply will come from gas not contracted on the international spot markets.
Mark Hatfield, the managing director of Chevron Australia, contrasted Dutton’s proposal with an existing gas reservation program in Western Australia where Chevron has a significant presence.
Dutton said that the prospective application of the company allowed it to evaluate the policy prior to signing long-term agreements. This was "quite a different plan" from Dutton's.
Hatfield stated that "Energy Security is an easy target for political footballs... Some of the things we are seeing right now could be short-term solutions with long-term negative consequences."
ExxonMobil Australia said that expanding production is "the key" to ensure reliable and affordable gas. The Bass Strait is the main source of gas for eastern states.
Commercial director David Berman stated that "regulatory restrictions have become more restrictive and have made it harder to develop new gas supplies. Risks that were previously normal on the oil and gas market, such as engineering and geological risks, have now been replaced with government policy and regulatory risks."
(source: Reuters)
