Shell warns Australia about taxing LNG windfall profit

Shell has warned Australia not to introduce a windfall charge on gas exporters. It said that such a tax would 'deter investment' and 'undermine energy security, as LNG prices are surging following the disruption of global supplies due to the Iran War.

The conflict in the Middle East has caused the supply of LNG to drop, and Australia is now the second largest LNG supplier. Its export revenues are expected to increase due to the lower supply.

Canberra is said to be weighing up options to capitalize on the higher prices. Prime Minister Anthony Albanese has asked the Treasury Department to model a tax on LNG exports and to suggest reforms to Petroleum Resources Rent Tax.

Cecile Wake, the chairwoman of Shell Australia which exports gas from the Queensland Curtis project in Queensland, warned against "short term fixes" as a response to the energy crisis.

She said this in her remarks at the Australian Domestic Gas Outlook Conference, released on Tuesday.

POTENTIAL EFFECTS OF POLICIES PROPOSED

She said that the proposed policies would "erode project value and render many future growth opportunities in Australia uneconomical and uncompetitive when compared with global alternatives,"

She stated that "high commodity prices already flow through to Australians via higher corporate income tax and?PRRT reciepts."

Since the beginning of the Iran conflict in February, Asia spot LNG prices are at three-year highs. Profits from long-term contracts tied to oil prices - which account for 75% of Australia’s export shipments - are expected to also surge in the next three to six month.

Australia exported $44.5 billion in LNG last year. Gas producers have been criticized for low tax payments due to rules that allow them to recoup their construction costs before they pay tax.

(source: Reuters)