Shell calls Australia’s gas reserve plan a ‘sledgehammer’

Australia, a top global exporter of liquefied natural gas (LNG), is set to implement legislation that would require LNG producers to reserve a portion of their output for domestic consumption. This move aims to tackle supply shortages and reduce energy costs. However, Shell Australia, a key player in the sector, has strongly criticized the government's plan, deeming it an overzealous and disruptive intervention.

Cecile Wake, the chair of Shell Australia, highlighted the plan's flaws, stating that it represents a "sledgehammer to crack a nut" and could potentially undermine the market's functionality. The draft proposal necessitates that energy exporters reserve up to one-fifth of their production by January 1, 2028, effectively over-supplying Australia's east coast gas market by 110% of forecast demand.

Wake argued that such a heavy-handed approach could drive prices too low, potentially leading to market failure. Despite Australia being one of the world's largest LNG exporters, the majority of its significant gas reserves are located in the northwest, away from the densely populated southeast where demand is concentrated.