Woodside Energy says it will abandon a proposed Bass Strait gas drilling campaign if the federal government’s planned reservation scheme pushes domestic prices too low.
And Shell says the policy risks undermining investment and sowing the seeds of future market failure.
The dual warnings intensify pressure on the Albanese government to amend its proposed gas reservation scheme, which is expected to be unveiled as soon as Wednesday and would require liquefied natural gas exporters to supply up to 20 per cent of their exportable volumes to the domestic market.
Producers have criticised the government’s push to create a structural oversupply of gas, alongside proposed requirements to sell into the domestic market irrespective of price. They believe the measures could undermine the economics of developing new supplies.
Woodside chief operating officer Breyden Lonnie said the company was assessing a potential development linked to its Bass Strait assets that could deliver 200 petajoules of gas.
But he said the project would not proceed if the reservation scheme materially affected domestic prices.
“We’re looking at an opportunity that ties into our Bass Strait assets, which is 200 petajoules of gas. So that’s enough to supply Sydney here or Melbourne for about two years of gas, and we’re considering that opportunity right now,” Mr Lonnie said.
“Now, if the (domestic gas) reservation scheme comes out and particularly influences pricing, then that development – I can say with a high level of confidence – will not be commercial.”
The Bass Strait has historically underpinned gas supplies to Australia’s eastern seaboard but declining production from mature fields has increased pressure to develop replacement reserves.
Shell Australia country chair Cecile Wake said the proposed scheme contained fundamental flaws that, if left unaddressed, could damage the functioning of the domestic gas market.
Ms Wake singled out the prospect of requiring producers to supply 110 per cent of forecast domestic demand and the obligation to sell gas regardless of prevailing prices.
“We don’t have a market failure today, but we will sow the seeds of tomorrow’s market failure if we don’t fix those two elements: the permanent material structural oversupply and a completely asymmetrical contracting market,” she said.
The intervention from two of the country’s largest gas producers comes as the government prepares to finalise a policy intended to shield Australian manufacturers and other large energy users from international gas prices. The scheme is designed to ensure more gas is available domestically if the eastern states face a supply shortfalls later this decade. But producers say forcing additional volumes into the market could suppress prices to levels that discourage investment in new fields.
The Energy Users Association of Australia, which represents major industrial gas consumers, rejected suggestions the outlook for producers was as bleak as their warnings implied.
Chief executive Andrew Richards said the industry’s claims of impending disaster were difficult to reconcile with current market conditions, pointing to strong earnings across the global energy sector.
“This looks like Christmas morning for you guys, because there’s lots of positive stuff happening,” Mr Richards said.
“Yes, once we get through the uncertainty of this current legislative piece, everyone should be relatively happy with this.”
Mr Richards also focused criticism on Santos chief executive Kevin Gallagher, who last month said he was “living rent free in the heads” of critics of the company’s Gladstone LNG export facility in Queensland.
The comments came amid growing debate over whether LNG exporters should contribute more to the domestic market as Australian manufacturers contend with elevated energy costs.
“The CEO of Santos said the other day that he’s living rent-free in the heads of some of his competitors. I would say to Santos, well, you’ve been living rent-free in the Australian market for a decade,” Mr Richards told an energy conference in Sydney.
“It’s now time to start to pay some; pay the fair share of the rent.”
The competing interventions expose the central tension confronting Labor as it prepares to unveil the reservation scheme: securing sufficient gas for domestic users without discouraging the investment needed to maintain supply.
The final design of the scheme will determine whether the government can increase the availability of gas for Australian industry while preserving incentives for producers to develop new reserves.
Woodside Energy says it will abandon a proposed Bass Strait gas drilling campaign if the federal government’s planned reservation scheme pushes domestic prices too low.
And Shell says the policy risks undermining investment and sowing the seeds of future market failure.
The dual warnings intensify pressure on the Albanese government to amend its proposed gas reservation scheme, which is expected to be unveiled as soon as Wednesday and would require liquefied natural gas exporters to supply up to 20 per cent of their exportable volumes to the domestic market.
Producers have criticised the government’s push to create a structural oversupply of gas, alongside proposed requirements to sell into the domestic market irrespective of price. They believe the measures could undermine the economics of developing new supplies.
Woodside chief operating officer Breyden Lonnie said the company was assessing a potential development linked to its Bass Strait assets that could deliver 200 petajoules of gas.
But he said the project would not proceed if the reservation scheme materially affected domestic prices.
“We’re looking at an opportunity that ties into our Bass Strait assets, which is 200 petajoules of gas. So that’s enough to supply Sydney here or Melbourne for about two years of gas, and we’re considering that opportunity right now,” Mr Lonnie said.
“Now, if the (domestic gas) reservation scheme comes out and particularly influences pricing, then that development – I can say with a high level of confidence – will not be commercial.”
The Bass Strait has historically underpinned gas supplies to Australia’s eastern seaboard but declining production from mature fields has increased pressure to develop replacement reserves.
Shell Australia country chair Cecile Wake said the proposed scheme contained fundamental flaws that, if left unaddressed, could damage the functioning of the domestic gas market.
Ms Wake singled out the prospect of requiring producers to supply 110 per cent of forecast domestic demand and the obligation to sell gas regardless of prevailing prices.
“We don’t have a market failure today, but we will sow the seeds of tomorrow’s market failure if we don’t fix those two elements: the permanent material structural oversupply and a completely asymmetrical contracting market,” she said.
The intervention from two of the country’s largest gas producers comes as the government prepares to finalise a policy intended to shield Australian manufacturers and other large energy users from international gas prices. The scheme is designed to ensure more gas is available domestically if the eastern states face a supply shortfalls later this decade. But producers say forcing additional volumes into the market could suppress prices to levels that discourage investment in new fields.
The Energy Users Association of Australia, which represents major industrial gas consumers, rejected suggestions the outlook for producers was as bleak as their warnings implied.
Chief executive Andrew Richards said the industry’s claims of impending disaster were difficult to reconcile with current market conditions, pointing to strong earnings across the global energy sector.
“This looks like Christmas morning for you guys, because there’s lots of positive stuff happening,” Mr Richards said.
“Yes, once we get through the uncertainty of this current legislative piece, everyone should be relatively happy with this.”
Mr Richards also focused criticism on Santos chief executive Kevin Gallagher, who last month said he was “living rent free in the heads” of critics of the company’s Gladstone LNG export facility in Queensland.
The comments came amid growing debate over whether LNG exporters should contribute more to the domestic market as Australian manufacturers contend with elevated energy costs.
“The CEO of Santos said the other day that he’s living rent-free in the heads of some of his competitors. I would say to Santos, well, you’ve been living rent-free in the Australian market for a decade,” Mr Richards told an energy conference in Sydney.
“It’s now time to start to pay some; pay the fair share of the rent.”
The competing interventions expose the central tension confronting Labor as it prepares to unveil the reservation scheme: securing sufficient gas for domestic users without discouraging the investment needed to maintain supply.
The final design of the scheme will determine whether the government can increase the availability of gas for Australian industry while preserving incentives for producers to develop new reserves.