Shell to offer more gas to Australian market in 2023

  • Market: Natural gas
  • 26/01/23

Shell plans to offer more gas for delivery into the Australian domestic gas market from its Queensland-based gas company QGC, adding about 8PJ of gas supply availability for 2023.

This volume is in addition to the 20PJ of gas offered domestically in December 2022, at or below the price cap level of $12/GJ, Shell said in a statement on 23 January.

Shell's offer is a pivot away from east coast gas producers' strategy since the Albanese government's imposition of a price cap in the domestic gas market in mid-December. The government imposed the 12-month price cap in an attempt to control soaring energy prices.

But the law attracted strong opposition from major gas producers like Woodside and Shell, which have mostly held back on offering spot supplies and longer-term gas contracts to local retailers since the imposition of the law, market participants said. The producers likely held back on plans to contract gas after they assessed their future strategy following the imposition of the price cap.

Shell's announcement comes days after the Australian Competition and Consumer Commission instructed gas producers that they must immediately start selling the reduced-price wholesale gas to comply with federal rules, or face fines of at least $50mn.

Shell's offers have attracted substantial buying interest so far, despite delivery locations being limited because of haulage shortage. But market participants said that the move is unlikely to abate domestic supply fears completely for now, as the market will likely wait and see if the Australian buyers that do end up procuring these supplies for Shell will eventually offer them to downstream domestic customers, or choose to sell them back to LNG producers.

Shell, among other major gas producers, had opposed the price cap on fears it would discourage investment in important gas projects in the country.

Shell warned that diverting gas supply from the north to the south is neither a sustainable nor an affordable way to supply customers in southern markets, and called for a policy environment that would encourage new supplies, especially in close proximity to southern demand points.

QGC anticipates that additional supply will become available for offer as the year progresses, based on current production forecasts, Shell said in its statement.

Shell's QGC business produces natural gas from wells drilled into coal seams in the Surat basin. The firm also operates the two-train 8.5mn t/yr Queensland-Curtis LNG project.


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