The Great Gas Gambit: How Shell's Singapore Shuffle Costs Australia Billions
There’s something deeply unsettling about watching a tanker ship glide through the muddy waters off Gladstone, Australia, carrying enough liquefied natural gas (LNG) to power a city like Melbourne for a week. What’s even more unsettling? Knowing that somewhere along its journey, the ownership of that gas shifts—not to the buyer, but to a shell (no pun intended) company in Singapore, thousands of miles away. This isn’t just a logistical quirk; it’s a masterclass in tax avoidance, and it’s costing Australia billions.
The Singapore Shuffle: A Tax Haven in Disguise
Let’s cut to the chase: Singapore isn’t just a trading hub; it’s a tax haven in all but name. Personally, I think the term ‘low-tax jurisdiction’ is a polite way of saying ‘corporate tax dodge.’ Jim Killaly, a former deputy commissioner at the Australian Taxation Office, puts it bluntly: it’s like taking money out of one pocket and putting it into another, but when you do it between companies in different tax jurisdictions, the effect is a massive reduction in Australian tax. What makes this particularly fascinating is how brazenly it’s done—right under the noses of regulators.
Shell’s Billion-Dollar Game
Shell, the global oil and gas giant, is at the heart of this scheme. Between 2017 and 2024, its Singapore-based LNG trading arm bought $83 billion worth of gas, mostly from Australia, and sold it for $105 billion—a tidy $22 billion markup. But here’s the kicker: on that profit, Shell paid just $178 million in taxes to Singapore, a mere 6.3%. In Australia, where the gas is extracted and liquefied, the corporate tax rate is 30%. Do the math—it’s staggering.
What many people don’t realize is that this isn’t just about Shell. Singapore has become the go-to hub for LNG trading, with companies exploiting its lax tax laws and favorable regulatory environment. Saul Kavonic, an energy analyst, notes that Singapore now handles a significant chunk of the half-trillion-dollar global LNG market. It’s not just about trading gas; it’s about trading profits—and shifting them where they’ll be taxed the least.
The Art of Transfer Pricing
At the heart of this scheme is something called ‘transfer pricing.’ It’s a legitimate accounting practice, but in the hands of multinationals, it becomes a tool for profit shifting. Shell, for instance, charges its Australian operations through related companies in Singapore. Shell Tankers, another Singapore-based entity, does over 70% of its business with related parties, including Shell’s Australian LNG operations. On $2.5 billion in profits, it paid just $56 in taxes—a rate of 2.3%. If you take a step back and think about it, this isn’t just tax avoidance; it’s tax evasion by another name.
The Broader Implications
This raises a deeper question: why is Australia letting this happen? The gas industry argues that high taxes would make Australian projects unviable, but that’s a red herring. The real issue is fairness. When gas prices spike—as they did during the Ukraine war or the recent Middle East turmoil—profits should flow back to the country where the gas is extracted. Instead, they’re siphoned off to Singapore, leaving Australia with a fraction of what it’s owed.
A detail that I find especially interesting is the role of long-term contracts versus spot markets. Most Australian gas is sold under long-term contracts, but the spot market is where the real money is made. During the Ukraine crisis, Shell sold gas to Europe at sky-high prices, but because the transactions went through Singapore, Australia saw little of the windfall. What this really suggests is that the system is rigged—and it’s time to fix it.
What Can Be Done?
Proposals for a flat tax on gas exports, based on volume rather than profit, have been floated. While critics argue it would harm Australia’s relations with Asian buyers, I think it’s a necessary step. The current system isn’t just broken; it’s being exploited. Jason Ward, a tax accountability expert, puts it well: the vast majority of global trade is now within multinational structures, and these are artificial constructs designed to minimize tax.
Final Thoughts
As I reflect on this, I’m struck by how little has changed since mining giants like BHP and Rio Tinto used similar tactics. Both eventually settled with the ATO, but the fact that Shell is still getting away with it shows how much work remains. The gas tax debate isn’t just about revenue; it’s about sovereignty, fairness, and accountability. Australia’s resources should benefit Australians—not multinationals playing shell games in Singapore. It’s time to close the loophole and reclaim what’s rightfully ours.
