Shell warns that Australia's gas reservations plan could worsen shortages

Shell warned Tuesday that Australia's proposal to force more gas from export onto the domestic market would end up discouraging investment and worsening shortages.

Energy has become a major issue in the campaign ahead of Australia's general election on May 3. The conservative Liberal-National Coalition pledged to lower power bills and avoid a shortage on the East Coast through a reservation scheme.

Shell Australia Chair Cecile wake said that export controls are not the best solution. She also questioned if they would have a material impact on consumer prices.

She told a Sydney gas conference that "the fact that export controls are the easiest lever that the federal government has now to solve the Southern Gas Problem is not a good reason to pull this lever even 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 produces more than enough gas to meet domestic demand, but the majority of it is sold for export. The East could face a shortage of gas by 2027, according to the competition regulator.

Peter Dutton, the leader of the coalition opposition, said that, if elected, he would force exporters, under penalty, to send 10% to 20% more products to the domestic market.

The existing export contracts will not be affected and the additional supply will come from gas that is sold on the international spot market.

The centre-left Labor Party, which is in power, has been focusing on renewables. However Anthony Albanese, the Prime Minister of Australia said that he was willing to use his emergency powers to order gas producers to divert their supply if there were a shortage.

Wake criticized the "ideologically-polarised and politically-stretched debate about energy policy", and suggested that the government pursue policies which encourage investment.

She said, "Rather than redistribute an ever-diminishing piece of pie, let's increase the size of it." Reporting by Christine Chen, Sydney; Editing and production by Richard Chang

(source: Reuters)