Western Australia’s gas supplies continue to ignite debate among the state’s resources community, but as the discussion between suppliers, users and the government rolls on the potential risk to upcoming mining developments is reportedly increasing.
Western Australia’s gas supplies continue to ignite debate among the state’s resources community, but as the discussion between suppliers, users and the government rolls on the potential risk to upcoming mining developments is reportedly increasing.
An Economics Consulting Services report, released last week by the DomGas Alliance, revealed that about 15 companies were searching for gas supplies for 17 projects, which have an estimated annual economic output of $9.2 billion.
DomGas Alliance chairman Stuart Hohnen said a lack of gas supply could delay or threaten the viability of those projects, which collectively had a capital construction cost of $23 billion.
He added that gas prices had almost tripled in the past 12 months due to a “crisis” in gas supplies.
Woodside Energy enterprise capability director Keith Spence last week warned the resources industry that the days of so-called “two dollar gas” were over because it was now significantly more expensive to develop gas projects.
He added that supplies would increase over time as it became more economical for developers. However, he agreed there was a short-term supply problem.
But while supplies are estimated to increase in 2010, iron ore explorer Australasian Resources Ltd is still trying to source supply to underpin its $2 billion Balmoral South project in the Pilbara.
It doesn’t need gas until 2010.
Australasian managing director Andy Caruso said the company’s preferred option was gas because it was a cheaper energy source and was more environmentally friendly.
Australasian is in discussion with suppliers and wants to lock in a supply contract before it hands down its feasibility study, which is due to be completed in March.
Mr Caruso said he would look at alternative energy sources, such as coal and diesel, if it was unable to strike the right deal.
Mr Caruso hopes Australasian’s major backer, China’s fourth largest steelmaker Shougang Corporation, will be able to make headway.
It was in Perth this week, and Mr Caruso said there had been encouraging discussions between Shougang and WA’s gas suppliers.
“We understand that it is a competitive environment and we are competing for the same gas that is out there, but we would like to see some certainty,” Mr Caruso said.
He added that developers could be faced with a “bidding war” to lock in gas.
“That isn’t good for the development of the state,” he said.
Other projects yet to secure gas supplies include iron ore expansions for BHP Billiton and Rio Tinto Iron Ore, Murchison Metals’ Jack Hills iron ore project and Citic Pacific’s Cape Preston mine.
Aside from iron ore developers, other groups, like molybdenum developer and DomGas Alliance member Moly Mines Ltd, fellow alliance member Newmont Australia and vanadium explorer Aurox Resources Ltd are searching for supplies.
The alliance is pushing for government intervention to help solve what it claims is a gas supply crisis.
It predicts WA gas demands will increase by about 650 terajoules per day in the next six years and it was important for government to help stimulate new project development, reduce infrastructure costs and break-up what it calls anti-competitive selling arrangements by the North West Shelf joint venture.
