Why a gas export tax could burn through Australia’s fuel security

A gas export tax could end up hurting Australia’s fuel security, despite being designed to reserve LNG for domestic use and raise more revenue as global demand soars during the Iran war.

Australia’s ability to export more liquefied natural gas to key Asian markets like Singapore, as leverage to secure more imported fuel, could be compromised should a tax on gas exports be introduced to capitalise on higher global prices, shadow energy minister Dan Tehan told The Nightly.

“More tax drives the cost up, kills investment and hurts our export partners at a time when we are more reliant on them than ever for our fuel security,” he said.

Anthony Albanese is in Singapore on Friday meeting the city state’s Prime Minister Lawrence Wong in a bid to secure imported fuel supplies beyond May, and vowed to be a reliable supplier of LNG.

“Australia has been a very reliable supplier of LNG and we will remain so - contracts are fulfilled,” he told reporters.

“We believe very critically that our reputation as a reliable supplier of energy, not just to Singapore but to other nations in the region is a critical part of the way that Australia is perceived, quite rightly.

“If Singapore requires, through commercial processes, further LNG, there is over a period of time additional fields are going to come online and we will continue to provide support for Singapore.”

The race to secure new supply of refined fuel is occurring as the Greens and independent senator David Pocock push for a 25 per cent gas export tax as members of a Senate committee examining the idea, arguing it could raise $17 billion a year.

Labor backbenchers Ed Husic, a former industry minister, and Michelle Ananda-Rajah have voiced support for the idea, also backed by the left-leaning Australia Institute think tank.

Australian Energy Producers Australia chief executive Samantha McCulloch said a gas tax would jeopardise Australia’s ability to export LNG to key producers of refined fuel.

“Countries such as South Korea and Singapore are also critical to Australia’s own fuel security, supplying a significant share of our imported refined fuels — highlighting the strategic importance of our two-way trade relationships,” she told The Nightly.

“Imposing new taxes on LNG exports risks weakening Australia’s position as a trusted supplier and undermining the investment needed to maintain reliable, long-term energy supply.”

Federal Assistant Resources Minister Anthony Chisholm is standing by a Labor plan for gas exporters to reserve 15-20 per cent of production for domestic needs from 2027.

“Amidst global uncertainty, it’s essential we continue to ensure gas supply while delivering more affordable gas for consumers,” Senator Chisholm told The Nightly.

“That’s why we’re consulting on a gas reservation scheme - to secure the gas Australians need.”

Singapore supplies 55 per cent of Australia’s imported petrol and a quarter of the unleaded, diesel and jet fuel shipped in from overseas.

While Australia is heavily reliant on Singapore for refined fuel, Singapore is expected to become even more reliant on Australian liquefied natural gas after Iran last month damaged Qatar’s Ras Laffan LNG plant with air strikes.

The continued blockade of the Strait of Hormuz further hampers exports from Qatar, one of the world’s biggest LNG producers.

Singapore is particularly reliant on LNG imports, requiring it for 92 per cent of its domestic electricity needs, Ember data showed.

The Asian oil refining giant last year also sourced 47 per cent of its LNG from Qatar, Global Trade Tracker figures revealed.

Australia was supplying more than a third of Singapore’s LNG needs before the US airstrikes on Iran sparked a broader Middle East conflict.

This is only set to grow the longer the war with Iran continues.

The surge in demand for Australian LNG, because of a disaster with a key rival global supplier, is comparable to Brazil’s Vale tailings dam collapse in 2019 triggering more Chinese demand for Australian iron ore.

A Greens-chaired Senate Select Committee on the Taxation of Gas Resources was established in late March, a month into the Middle East conflict, and is due to deliver a report by May 7, five days before the Budget.

But West Australian Liberal senator Dean Smith, a member of this committee, is opposed to the gas tax idea in the current climate.

“At a time of global uncertainty, Australia must be a stable and reliable energy provider to our region - not a country that changes the rules mid-game and undermines confidence in our exports,” he told The Nightly.

“The push by the Greens and Independents for a gas export tax is short sighted poor economics, and reckless strategic policy.”