On a muddy waterway near Gladstone, about 500 kilometres north of Brisbane, tanker ships like this one are a common sight. Each holds enough liquefied natural gas (LNG) to power a city the size of Melbourne for a week.
The ship is docked at Curtis Island, a major gas export terminal. Inside this marvel of engineering, millions of cubic feet of gas every day are chilled and condensed to a liquid form about one-600th of its original size. From here, the ship sails north to markets in Asia.
In this way, fossil fuel companies send much of Australia’s vast reserves of natural gas overseas.
But then, somewhere along the journey, a seemingly inexplicable thing happens.
Ownership of the cargo transfers from the Australian company that extracted, cleaned and liquefied the gas to another one in Singapore, thousands of kilometres away.
The Singapore buyer is not really the customer — it almost certainly does not use the gas it purchases. It is another arm of the same company.
Jim Killaly, a former deputy commissioner at the Australian Taxation Office, says the use of Singapore as an LNG trading hub by oil and gas companies is no coincidence.
Singapore, if not quite a tax haven, is a “low-tax jurisdiction”. “It’s a bit like taking money out of one pocket and putting it into your other pocket,” Mr Killaly says.
“But if you do that between companies, one of which is in a tax haven, the effect is that you pay less Australian tax.”
Amid renewed debate over whether Australia is getting enough tax from its gas exports, an investigation by the ABC shows how one LNG producer uses Singapore to help boost its profits.
That company is Shell, the global oil and gas super major, which is the world’s largest trader of the fuel.
Over the eight years to 2024, Shell’s LNG trading and marketing arm in Singapore made billions of dollars in profit. And it did so by buying LNG from producer countries such as Australia before on-selling the gas at a significant mark-up.
Shell is not alone in the practice. Over the past decade Singapore has become a vast trading hub for gas.
Saul Kavonic, head of energy research at MST Financial, says the island state is now a key link in the half-trillion dollar global LNG industry.
“In Asia, Singapore is the main LNG trading hub,” Mr Kavonic says.
“It has the service providers, it’s the consultants, the legal expertise, it has a friendly legal and regulatory environment to enable trading.”
Puah Kok Keong is the head of Singapore’s Energy Market Authority, which regulates the electricity and gas industries in the island state. He says Singapore is a heavy user of gas but acknowledges most of the LNG bought and sold there never physically enters the country.
Realistically, it may never go anywhere near Singapore.
“The amount of trading done for LNG is actually more in terms of paper trades,” Mr Puah says.
Indeed, the size of those paper trades has become monumental.
The Singaporean government has only disclosed the figures for 2022, but they show the value of LNG trades dwarfed the value of imports.
Tropical tax paradise
As Singapore’s role in the game of LNG trading has grown, so too have the numbers reported by Shell.
Financial statements lodged by Shell and its subsidiaries in Australia, Singapore and the UK, where the company is ultimately headquartered, reveal the eye-watering sums of money involved in the trade.
Corporate records show the Singapore branch of Shell Global LNG paid $US83 billion ($116b) for LNG between 2017 and 2024.
The branch then sold that gas for $US105 billion — a mark-up of $US22 billion, or 26.5 per cent over the period.
In 2021 and 2022, when the global LNG market was thrown into turmoil in the lead-up and aftermath of Russia’s invasion of Ukraine, gross margins widened.
Once costs between 2017 and 2024 were taken into account, Shell Global in Singapore reported a pre-tax profit of $US2.8 billion.
Its tax payment for the eight-year period — $US178 million, or 6.3 per cent.
Beyond paying a low tax rate, the statements also reveal another strategy multinationals use to extract profits and value — charging themselves through related companies.
With Shell Global LNG, for example, many of the costs used to write down its gross profits would have been paid to related arms.
Shell Tankers, another Singapore-based company which provides the shipping services needed to ferry LNG cargoes around the world, can shed some light.
Shell Tankers does more than 70 per cent of its business with related parties, which include Shell’s Australian LNG operations.
From 2017 to 2024, it booked revenues of almost $US19 billion and profits before tax of $US2.5 billion.
On those profits, its tax expenses to the Singaporean government were $US56 — a rate of 2.3 per cent.
Shell maintains it is “committed to openness and transparency on the amount of tax it pays”.
“All our related-party sales arrangements are undertaken on an arm’s length basis,” a Shell spokeswoman said in response to detailed questions from the ABC.
“We have prepared a Voluntary Tax Transparency Report showing all taxes paid in Australia each year since 2016 and an ongoing and transparent dialogue with the Australian Taxation Office under its justified trust program.”
‘High risk tax avoidance’
Mr Killaly, the former ATO deputy commissioner, says the arrangement between Shell’s Australian arms and Shell Global LNG has the hallmarks of a “high risk tax avoidance” case.
His comments are made on the basis of public information and not from any historical knowledge from his time at the ATO.
“You’ve got an Australian entity dealing with an entity that has a base in a low-tax jurisdiction,” Mr Killaly observes. “It’s happening over a number of years.”
“The margin of $US22 billion is very significant, and the parties are related. So, to me the warning bells would be ringing in terms of whether there’s a profit shifting risk there.“
Mr Kavonic says LNG exporters can add “10 per cent on their revenue from trading activities on average”.
But he says some companies can book outsized trading margins if they have “legacy” contracts under which they buy cheap gas.
