Energy giant Shell in U-turn over gas supply amid ACCC pressure
One of the east coast’s biggest gas suppliers has reversed a suspension on offering new volumes to buyers just days after the ACCC warned producers over withholding supply.
One of the east coast’s biggest gas suppliers has reversed a suspension on offering new volumes to buyers just days after the consumer watchdog warned it would punish producers if they withheld supply from the domestic market.
Shell along with Woodside Energy put a freeze on selling gas into the market on December 13, blaming the government’s intervention into energy markets and warning that the move could lead to shortages and gas rationing.
The standoff was still in place a month later amid ongoing uncertainty over the government’s legislation. However, Shell said on Monday it had now resumed a process to test buyers’ appetite for 8 petajoules of gas delivered in 2023 from its Queensland business at the government’s mandated price cap of $12 per gigajoule.
“Typically, for the majority of the market, retailers and customers contract gas well in advance of the required supply period. However in light of the significant ongoing regulatory changes impacting the gas market, QGC believes it is important to offer additional gas for delivery in 2023 under an expression of interest at this time,” a Shell spokeswoman said on Monday. “Based on current production forecasts, QGC anticipates additional supply will be available to offer to the market as the year progresses.”
Shell, operator of the QCLNG gas export plant in Queensland, last month said a tender process offering 50 petajoules of gas to buyers in 2023 and 2024 had been put on hold as it assessed the fallout from Labor’s proposal to permanently control prices.
It followed a warning from the Australian Competition & Consumer Commission that said it would crack down on suppliers it believed were running “avoidance schemes” to get around the price caps.
While the move by a big hitter in the market may signal a slight thawing in relations between industry and government, Shell indicated it was still frustrated over the intervention and a blame game that has seen Queensland LNG exporters including Shell targeted for not doing enough to supply the market.
“It is essential governments and regulators create a policy environment which encourages new supplies especially in close proximity to southern demand points. Squeezing gas from the north to the south is neither a sustainable nor an affordable way to supply customers in southern markets,” its spokeswoman said.
“We will continue to engage constructively with government on the Australian Domestic Gas Security Mechanism and code of conduct consultation. We need to shift from the current patchwork of competing and inconsistent regulatory interventions with their unintended consequences, to solutions which will deliver long-term energy security and prosperity for Australians.”
The price cap guidelines, released last Tuesday, included the ACCC noting it would be watching out for any deals designed to avoid the price cap, which applies only to uncontracted wholesale gas sold this year.
Energy Minister Chris Bowen said the new guidance from the competition regulator meant gas producers now had “no excuse not to get on with supplying the energy Australian businesses need”.
Consultation on the code of conduct, which could result in a requirement for gas to be permanently sold at a “reasonable price”, wraps up on February 7.
Leading gas producers have said they will not finalise new supply contracts for 2024 until the Albanese government unveils its controversial mandatory code of conduct, as confusion over the wholesale gas price cap triggers opposition claims there could be rationing and blackouts.
Woodside’s executive vice-president of marketing and trading on Thursday denied the company was withholding supply, saying it was putting “every molecule” of gas it was producing into the market. Retailers – some of whom have ceased taking new gas customers – maintain they are still having difficulty getting contracts for future gas supply.
The ACCC in August warned of a “looming” shortfall in the east coast gas supply, saying domestic supplies could fall short of projected 2023 demand by more than 55 petajoules, which could see prices spike in the winter – a situation the government’s market intervention is designed to prevent.
However, a heads of agreement reached in September saw LNG exporters agree to provide an extra 157 petajoules for the domestic market next year and charge domestic users no higher than international customers. The head of the consumer watchdog said that producers being accused of withholding supply were reaping super profits on the international market that could be invested in new gas exploration.
The Australian Petroleum Production & Exploration Association – representing gas producers – welcomed the release of the guidelines, but noted it had come almost a month after the price cap came into effect. APPEA chief executive Samantha McCulloch said her organisation had been waiting for clarification since the middle of last month.
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