Clarity key to ERA domgas involvement

The Economic Regulation Authority has told the state’s domestic gas inquiry it would be open to a role in the administration of a domestic gas policy but would need a clear mandate to be involved.

ERA representatives including chair Steve Edwell appeared before the Peter Tinley-chaired inquiry into the state’s domestic gas policy this morning, outlining its suitability for a potential role in maintaining the WA gas market.

The DomGas Alliance, a group comprising the state’s largest natural gas users, singled out the ERA for a role in monitoring domestic gas supply when it appeared before the inquiry in September.

Mr Edwell said today that the ERA’s experience in monitoring markets and compliance would be useful in a domestic gas context, but that it would face challenges because of inconsistency across the application of the domestic gas reservation policy and the lack of a transparent gas market.

The gas reservation policy is currently set out via individual, commercially focused agreements by project operators with the state, which apply a 15 per cent gas reservation requirement to production over the life of the producing asset.

The policy allows producers to prioritise exports when commercially appropriate but has drawn criticism for its lack of transparency and allegations that some producers are shirking their domestic requirement.

Mr Edwell told the inquiry the application of the policy through individual, non-uniform agreements would be an issue for the ERA if it were to be involved.

“As we see it, we’ve got the domestic gas reservation policy which gets effect through contracts the state has with individual shippers, and they’re all in different forms – some are commercial contracts, some of them are attached to state agreements,” he said.

“Then we haven’t got a gas market. We’ve got a bulletin board, which is a statement of forecasts, we’ve got a gas statement of opportunity which the Australian Energy Market Operator produces, which is basically a statement of demand-supply balance at a higher level, but we haven’t got a gas market per se.

“The issue is, if we were to get a compliance or monitoring role in terms of the domestic gas reservation adherence, what is our role, and what are the source documents?”

Mr Edwell said without change to the current system, any compliance role would require it to go back to contractual agreements with the individual operators – documents it does not currently have access to.

“Because the obligations are bespoke, in different contracts at different times and in different fashions, between the state and these producers, there’s no one rule,” he said.

“We would need to go back to that [individual] document.”

Mr Edwell said the ERA would need clarity over the job and be provided all the required information gathering powers necessary to fill a role in monitoring domestic gas supply.

However, he said the organisation would be willing to take a role in administering the policy if it was required.

“We’re always keen to take on a role to assist the state in whatever way the state things we can, consistent with our skill base – that’s welcome,” he said.

The panel also heard from market operator AEMO, around the challenges it faced in forecasting gas supply into the state without full access to confidential information.

AEMO executive general manager – Western Australia and strategy Kate Ryan and energy analyst Christopher Meredith told the inquiry the organisation was not privy to production numbers on a company basis but did have access to production figures by facility.

“Doing it on a facility basis is OK for some, so some like Gorgon is running pretty much as hard as it can – they’re producing up to their nameplate capacity,” Mr Meredith said.

“For others, it's where [production] is not [up to] gas plant capacity that is the issue.

“We’re talking about North West Shelf, Karratha gas plant here. They have a plant that can do 630 terajoules, they deliver to the market somewhere between 100 and 130 terajoules per day.

“They’re choosing to put gas to LNG, rather than to the domestic market.

“For those, we have to look at the facility. There are five partners there, but we can’t see which partners have delivered how much gas.

“That’s what the Department of Jobs, Tourism, Science and Innovation knows that we don’t – that’s the confidential side.”

Mr Meredith said greater transparency would be useful to the market operator.

Ms Ryan said the rules currently governing the Department of Jobs, Tourism, Science and Innovation, AEMO and the ERA limited the amount that they could collaborate in the domestic gas space.

The Chamber of Minerals and Energy WA will front the inquiry next week.