THE long-running debate over domestic gas reservations in Western Australia shows no sign of easing, with two Perth business leaders taking opposite sides last week.
Woodside executive director commercial and corporate, Rob Cole, told a Committee for Economic Development of Australia conference the current policy settings were working well, and that local businesses could look forward to an increased supply of gas.
Alcoa of Australia managing director Alan Cransberg, however, later told the same conference that more competition was needed in the domestic gas market.
Mr Cole told CEDA’s annual resources overview the domestic gas market was benefiting from growth in major projects.
This included the commissioning early this year of Woodside’s Pluto liquefied natural gas plant and the construction of the Gorgon, Wheatstone and Prelude LNG projects.
While these projects are export focused, Mr Cole said domestic gas supplies were also being boosted.
Apache Energy commissioned the Devil Creek domgas plant last year, BHP Billiton is building the Macedon domgas plant, and the Gorgon and Wheatstone LNG projects will include domgas supplies.
They will add to supplies from the North West Shelf Venture’s Karratha gas plant and Apache Energy’s Varanus Island gas plant.
“WA is a prime example of the way that LNG investment supports an expansion of domestic gas capacity, by increasing supply diversity and competition,” Mr Cole said.
“This is an important point to note in light of ongoing calls from some quarters for an expansion of existing gas reservation policies.”
Mr Cransberg told the conference LNG was an “outstandingly important industry” for Australia but signalled that the debate over domgas reservations was far from over.
“I also think we need to have a serious debate about how much energy we export and how much energy we leave for people to value add in Australia,” he said.
Mr Cransberg noted that large shale gas discoveries in the US had been earmarked for the domestic market, and had driven energy costs sharply lower.
In contrast, energy costs have been rising in WA, where the current policy requires LNG producers to reserve the equivalent of 15 per cent of their output for the domestic market, if it is commercially viable to do so.
Alcoa has been hit hard by rising energy costs; as the operator of three alumina refineries in the state’s South West, it is the largest buyer of gas in the domestic market.
“Long-term secure affordable supplies of energy are very important if we choose to value add in this country,” Mr Cransberg said.
“That’s a critical issue, not just for my industry but for many other industries that choose to value add.
“We’re very keen on the domestic gas reservation policy.
“I know that’s controversial but we’re also very keen to see independent marketing of gas from future projects to create more competition.”
The marketing of gas in the domestic market is a contentious issue.
Despite opposition from gas buyers represented by the DomGas Alliance, the North West Shelf Venture and the Gorgon joint venture, have regulatory approval for the joint marketing of their gas in the domestic market.
The approval runs to the end of 2015, unless the gas producers successfully apply for an extension.
The DomGas alliance expects that joint marketing will expire in 2015, given the increased size and maturity of the domestic gas market.
Mr Cransberg noted that Alcoa had invested more than $100 million in exploration companies Buru Energy, Latent Petroleum and Empire, to support their search for ‘unconventional’ onshore gas fields.
This is part of Alcoa’s efforts to boost its gas supply options in WA.