15/12/2009 - 15:26

Domgas calls for gas reservation action

15/12/2009 - 15:26

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The state's biggest gas users have called for Western Australia's gas reservation policy to be given "teeth" to meet what they call a worsening gas shortage and to ensure domestic supply obligations are not able to be avoided by LNG exporters.

Domgas calls for gas reservation action

The state's biggest gas users have called for Western Australia's gas reservation policy to be given "teeth" to meet what they call a worsening gas shortage and to ensure domestic supply obligations are not able to be avoided by LNG exporters.

The report by the DomGas Alliance - which counts Alinta, Synergy, Fortescue Metals Group and Newmont among its members - found domestic gas reservation obligations of the North West Shelf project had delivered 25 years of stable and
affordable energy supply to the State.

Subsequent reservation commitments have however failed to keep pace with the State's growing energy needs or the significant growth in LNG exports, Domgas said in a statement.

DomGas chairman Tony Petersen said priority should be given to meeting the energy needs of local industry and households.

"These resources belong to all Australians, not just Chevron or Woodside," Mr Petersen said.

Western Australia will require more than 1000 terrajoules per day of new domestic gas supply by 2020 to replace existing contracts and to meet forecast demand growth. The state however faces a serious shortfall of 500 TJ/day.

Key recommendations to strengthen the reservation policy include providing:

- Certainty - domestic gas obligations should be made unconditional and not subject to a "commerciality" escape clause;

- Flexibility - gas producers should be given sufficient flexibility in how they meet domestic supply obligations;

- Growth - domestic supply commitments should expand with any future growth in project gas reserves, production or LNG exports; and

- Timeliness - domestic gas should be supplied prior to or at least no later than LNG start-up.

The report endorsed Premier Barnett's position that gas should be supplied to the domestic market at a price that gives the state a competitive advantage in energy. Domestic gas prices should not exceed the price of gas entering the LNG processing leg of a gas project.

The report also called on the federal government to implement a national reservation policy to support and complement the state's reservation policy. Such a policy would ensure producers do not avoid domestic supply obligations when developing projects in offshore Commonwealth waters.

"It would send a strong message to LNG exporters that the Federal Government is serious about energy security and the needs of local industry and households," Mr Petersen said.

Western Australia is the most energy and gas-dependent economy in Australia. Natural gas fuels
half of the State's primary energy and 60 per cent of its electricity generation. In contrast, natural gas
supplies 22 per cent of the primary energy needs of Australia as a whole.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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