CCI wants gas boost

The Chamber of Commerce and Industry WA believes companies that are sitting on large undeveloped gas reserves should be subject to greater scrutiny when they seek to renew their retention leases.

The CCI also wants the state government to consider lighter regulation of gas pipelines to increase their capacity and usage.

These changes are part of a package of reforms put forward by the CCI in a discussion paper that explores alternatives to the state government’s contentious gas reservation policy.

The reservation policy proposes that 15 per cent of all gas deposits should be reserved for the domestic market, subject to the proviso it is commercially viable to supply domestic customers.

Woodside Petroleum chief executive Don Voelte has led the charge against the reservation policy, arguing it could compromise the viability of future gas projects.

The CCI acknowledges that there may in future be a deficiency in the supply of gas to the domestic market.

“Indeed there is already evidence of difficulties from some consumers in sourcing additional gas supply,” the CCI report states.

The DomGas Alliance, which represents major gas consumers like Alcoa and Alinta, has been arguing for some time that its members have been unable to secure substantial new gas supplies.

The CCI noted that Alcoa, Synergy and Horizon Power were generally supportive of the government’s policy but found little support for government intervention from other market participants.

Instead, the CCI believes there is strong support for measures to lift market efficiency.

The CCI, and the DomGas Alliance, believe applications to renew retention leases should be subject to more scrutiny.

It said the government should be more proactive in seeking information from third parties to test the veracity of claims made in applications.

Third parties with a perceived interest in particular leases should be asked to make specific submissions to assess whether development of the field is commercially viable.

The CCI said these changes would improve a system that already worked well. It noted that Chevron’s 2002 application to renew its lease over the Gorgon gas field was subject to a higher level of scrutiny after construction company Multiplex lodged a competing submission.

The CCI rejected a proposal by Alcoa for more fundamental reform of retention leases.

Alcoa favoured a gazetting process that would allow the government to transfer a lease to a third party that provided an absolute undertaking to develop a gas field.

Another issue that attracted a wide range of responses was the ability of the North West Shelf venture to jointly market its gas in the WA market.

The CCI said the ACCC should test these arrangements only if they were deemed to be adversely impacting competition in the domestic gas market.

The CCI believes the regulation of shipping tariffs has created a psychological barrier in the minds of potential customers, who are unwilling to pay more than the regulated tariff.

It called for lighter regulation of tariffs, which would also allow pipeline operators to accept gas that currently does not meet its quality specifications.

This could facilitate development of BHP Billiton’s Macedon gas field, which does not meet the current gas quality specifications.