$750m Waitsia project to proceed

The state government has disclosed that nearly all gas from the onshore Waitsia Stage 2 project will be exported, at least for the initial six years of production.

The project’s joint owners, Mitsui & Co and the Kerry Stokes-backed Beach Energy, announced in late December they had taken a final investment decision on the project and committed initial funding.

The final investment decision came four months after the government said Waitsia Stage 2 would be exempted from its domestic gas reservation policy.

At that time, Premier Mark McGowan said Waitsia would be allowed to export "some" of its gas as LNG for a "short" period of time.  

In an update released on Christmas Eve, in which Waitsia was described as a domestic gas project, the Premier said 85 per cent of its annual production would be exported, up to the end of 2028. 

From 2029, all remaining Waitsia reserves will be made available to the domestic market.

If that policy is maintained, the proportion of gas that is exported will depend on the life of the project, which could be up to 20 years.

The process for exporting Waitsia gas is based on a commercial agreement between the joint venture and the North West Shelf (NWS) project participants, led by Woodside Petroleum.

The NWS project’s Karratha gas plant will process and export up to 1.5 million tonnes of LNG per annum on behalf of the Waitsia joint venture, for the period between 2023 and 2028.

The LNG will be marketed independently by Mitsui and Beach.

However, gas from the Waitsia field will not physically be transported to Karratha for processing but is based on commercial arrangements.

The Waitsia joint venture will inject its gas into the Dampier to Bunbury pipeline, which is owned and operated by Australian Gas Infrastructure Group.

That gas will flow south to the domestic market, while the NWS project will extract an equivalent amount of gas for processing into LNG.

Waitsia, along with Strike Energy’s proposed West Erregulla project – which will exclusively supply the domestic market – have underpinned a revival of exploration and development activity in the onshore Perth Basin.

The Mitsui-Beach joint venture plans to invest between $700 million and $800 million in Waitsia.

This includes the drilling of up to six wells and construction of a new 250 terajoules per day gas processing facility, with engineering company Clough selected as preferred contractor.

During the three-year construction phase, which will commence in July, an average of 125 workers will be employed, with a peak of 200.

The operational workforce will be around 12 to 15 people.

The final investment decision on Waitsia remains subject to regulatory and environmental approvals.

Mitsui said it was in the final phase of the formal environmental impact assessment process.

It said approximately 60 per cent of the project’s greenhouse gas emissions would be reduced or offset from the start of production, in line with WA government policy.

However, 21 appeals have been lodged against the EPA’s recommended approval of the project.

The Conservation Council of WA has expressed concern about the exclusion of ‘scope 3’ emissions, which refer to emissions by industries using the Waitisia gas.

“A decade ago that approach might have been acceptable, but today it doesn’t pass the pub test,” director Piers Verstegen said.

Meanwhile, the Waitsia gas processing agreements was one of two signed recently by the NWS project participants.

The NWS participants also signed an agreement with Woodside Burrup Pty Ltd, in respect of gas from the Pluto fields.

Woodside Petroleum said the agreements were a key milestone in the transformation of the Karratha gas plant (KGP) into a third-party gas tolling facility and secured gas to fill emerging processing capacity.

The Woodside Burrup agreement is to process 3 million tonnes of LNG and 24.7 petajoules of domestic gas at KGP in the period from 2022 to 2025.

The Waitsia agreement is to process 7.5 million tonnes of LNG in the period between 2023 and 2028.

Woodside CEO Peter Coleman said the transformation of KGP into a third-party tolling facility would create new opportunities for Western Australia’s gas industry.

“The processing of third-party gas resources will unlock further value for the NWS Project,” he said.

“It will provide new revenue and LNG exports from the NWS Project, add to Western Australia’s domestic gas supplies from Pluto and help underpin Australia’s economic recovery,” he said.