26/11/2014 - 15:47

Domgas deal leaves uncertainty

26/11/2014 - 15:47

Bookmark

Upgrade your subscription to use this feature.

The Woodside-led North West Shelf joint venture has struck a new supply agreement that will deliver a small increase in the amount of gas coming into the local market but there is still no word on the future of contracts that account for more than half the state’s domestic supply.

Domgas deal leaves uncertainty
The Karratha gas plant.

The Woodside-led North West Shelf Venture has struck a new supply agreement that will deliver a small increase in the amount of gas coming into the local market, but there is still no word on the future of contracts that account for more than half the state’s domestic supply.

The new agreement, negotiated with the state government, relates to the offshore Persephone and Greater Western Flank 2 developments, which will supply gas to the NWS venture’s Karratha plant.

These new developments will enable the NWS venture to export a further 86 million tonnes of LNG.

About 15 per cent of the gas, equivalent to 100 terajoules per day, will be reserved for the domestic market, and is due to come on stream from 2017.

However, local industry remains concerned about the NWS venture’s existing domgas contracts, which will taper off by 2020.

Energy Minister Mike Nahan and the state’s Independent Market Operator have highlighted the expiry of these contracts as a key uncertainty for the energy sector.

The NWS venture currently supplies about 520TJ per day under these contracts, just over half the total supply to the domestic market.

Woodside has remained silent on the future of these contracts, and is likely to bide it’s time while it observes the impact of other supplies due to enter the local market.

Chevron’s Gorgon gas project includes a 300TJ per day gas plant for the domestic market, and is due to start supplying local customers by 2015.

That will be followed by Chevron’s Wheatstone gas project, which will be able to supply up to 200TJ per day to the domestic market from 2018.

Premier Colin Barnett said today his government was committed to ensuring the Western Australian community had a stable supply of gas,

“This agreement will help to bring more confidence and certainty for the Western Australian energy sector and energy intensive industries such as manufacturing around the future supply of gas,” he said.

“This outcome is consistent with the state’s domestic gas policy, and we will continue to work with other producers to ensure ongoing supplies of domestic gas for WA into the future.”

Under the agreement announced today, any gas produced by a third party and processed through the NWS joint venture’s plant will also be subject to the domestic gas commitment.

The premier thanked the North West Shelf joint venture for working with the government.

Woodside said the variation agreement announced today gave the NWS project participants certainty to make future investment decisions.

“The NWS project has been supplying domestic gas in the state for more than 30 years, the project participants have met all their prior domestic gas commitments and they will meet the new commitments as described in the variation agreement,” it said in a statement.

The DomGas Alliance, which represents domestic gas users, welcomed the announcement but had concerns.

“It was clear that the joint venture partners of the North West Shelf project wanted to exit the domestic gas supply market after 2020,” executive director Matt Brown said.

“This would have had disastrous consequences for industry, jobs and economic growth in our state. The state government has stood firm on the need for major oil and gas companies to deliver a small but fair share of our gas resources into the domestic market.

“We do, however, need to work through the detail of the proposed legislative changes, particularly on issues around the responsibility of the NWS to ‘market’ their gas to domestic users and also on the minister’s ability to vary the 15 per cent domestic requirement. These issues potentially undermine the objective of delivering gas into the local market.”

 

 

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options