Shell global CEO Ben van Beurden says no need for intervention in gas markets
Global energy giant Shell has called for stable energy policy after spending billions developing supplies in the last decade.
Shell, one of Australia’s top foreign investors, has rejected calls for government intervention to free up gas in the east coast market and warned both its shareholders and customers expect stable policy after committing huge spending developing supplies in the last decade.
Government intervention in the east coast’s gas sector through a reservation policy could slash $270 off annual power bills under modelling sent to the Coalition by the Centre Alliance as part of a major energy reform package.
The government is weighing a proposal to replicate Western Australia’s gas reservation in the eastern states along with a review of the Queensland export trigger and pipeline reforms.
However, Shell said the current Australian Domestic Gas Security Mechanism tool is working sufficiently although it remains open to further discussion with government.
“The local industry needs to be supplied with adequate quantities of gas at reasonable competitive prices. I think the current constructs for that have worked,” Shell’s global chief executive Ben van Beurden said in an interview on Tuesday before a meeting with Prime Minister Scott Morrison in Sydney.
Shell’s QCLNG unit in Queensland supplied 20 per cent of the east coast market’s annual gas demand in the last year and has plans to boost supplies further through its huge Arrow gas reserves in partnership with PetroChina.
Mr van Beurden warned that the government must be careful making major changes to rules once companies had outlaid large investments in the ground.
“Companies like us make investment decisions on a basis of an understanding that the parameters within which you took the investment decision are going to be sustained,” he said.
“There’s always changes by the way but by and large the investment climate that we accounted at the time of the commitment needs to hopefully roll forward in a way that is predictable and will attract future investments either in that asset or more of that kind.”
Shell’s gas customers would also expect similar sanctity to their contracts.
“Our customers who buy from us need to be assured of the fact that these gas molecules will continue to come forward and are not somehow subjected to future uncertainties which they can’t really get their arms around.”
Gas prices have jumped to $12 a gigajoule, up to three times historical levels, while long-term contracts are also proving difficult to negotiate for some manufacturers.
Gas shortages on the east coast are also set to emerge within three years and prices will remain high for the next decade ratcheting up pressure on large industrial users struggling with soaring tariffs, experts have warned.
While the government has indicated it will gradually release details of any new proposals with the industry over the next few months, it’s expected to raise the prospect of a domestic gas reservation policy through the formal Coalition of Australian Governments process.
In addition to tweaks to ensure more domestic supplies are made available through the export trigger, the minor party has raised the issue of potential pipeline ‘gouging’ with the Coalition.
Australia’s petroleum and gas lobby has slammed the proposed changes and called for more details to be released by the government.
However, Mr Patrick said full consultation on any regulatory reforms will be done in conjunction with industry.