Woodside, Shell raise gas alarm

Giants attack ALP intervention

WOODSIDE Energy has demanded the Albanese government reverse its intervention into energy markets, warning the proposed changes could lead to energy shortages and gas rationing, while fellow energy giant Shell has frozen a deal to offer gas to east coast customers.

The energy producer, which controls half the Bass Strait gas fields with ExxonMobil, has called for a meeting with Labor to find an alternative solution to the proposed policies ahead of parliament meeting on Thursday to push through the legislation.

“Woodside calls on the federal government to reconsider this unprecedented intervention and bring energy companies, retailers, manufacturers and infrastructure owners together to properly engage on a solution,” chief executive Meg O’Neill said.

“No one wants to see energy shortages and gas rationing. We must develop a comprehensive, longer-term solution that addresses gas supply and reliability, the overall energy mix and infrastructure, without undermining the market-based economy.”

The national cabinet’s sweeping market intervention has caused shock among energy producers, with a combination of price caps on gas and coal and a new code of conduct that could result in a requirement for gas to be permanently sold at a reasonable price.

“The Prime Minister last Friday correctly acknowledged that Australia has not invested enough in its own energy security. And yet the unprecedented market intervention announced risks driving investment out of the system,” Ms O’Neill said.

“The policy will not address falling domestic gas supply and the increasingly critical role of gas in providing dispatchable power.”

Shell has frozen a deal to offer gas to east coast customers, blaming the government’s market intervention.

Shell, operator of the QCLNG gas export plant in Queensland, said a tender process offering 50 petajoules of gas to buyers in 2023 and 2024 had been paused by its QGC business as it assessed the fallout from the proposal to permanently control prices.

“QGC needs to consider whether the design of the current EOI will meet the new regulatory requirements, including the 2023 price cap and the proposed mandatory code,” a spokeswoman said.

Credit Suisse analyst Saul Kavonic said “the damage” had already started.

“Nearly all gas contracting has shrivelled up in the last few days. Previously agreed funding for new supply developments has already been pulled,” Mr Kavonic said.

The government has maintained it has the right and was duty-bound to intervene in the energy market to force companies to sell their resources at lower prices.

Labor plans to cap domestic wholesale gas prices at $12 a gigajoule next year, while the price of thermal coal would also be capped in the east coast market at $125 a tonne.