15/10/2009 - 00:00

Down to business in energy debate

15/10/2009 - 00:00


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The debate over Western Australia’s energy policy is livening up as it gets more specific.

Down to business in energy debate
INTERESTED PARTY: AS a major consumer of gas, Alcoa is understandably concerned about future energy security. Photo: Tim van Bronswijk

BUSINESSES and industry groups in Western Australia have been unanimous in recent years in calling for the development of a comprehensive energy strategy for the state.

Most of the public commentary on this topic has been remarkably unproductive because it has been so vague and rhetorical.

That is starting to change, as industry players start to tackle real policy choices.

Alcoa of Australia managing director Alan Cransberg kicked off a lively exchange last week when he repeated his call for the federal and state governments to develop a national energy security strategy for the next 50 to 100 years.

He expressed particular concern about the security of gas supplies for domestic consumers, none of which is larger than Alcoa. Its alumina refineries are the state's biggest users of gas, so it has more at stake in this debate than any other business.

Mr Cransberg says the policy challenge is to get the right balance between expanding liquefied natural gas (LNG) exports while ensuring Australia's domestic needs are met.

“There is no doubt that LNG exports are of great benefit to the WA community, but the community also benefits from local industries, and our local industries need diversity of supply, and to operate in an environment of competitive selling," he told a function marking the 25th anniversary of the Dampier to Bunbury natural gas pipeline.

He put forward three key issues.

First, he wants to ensure new gas supplies are brought into the local market, to supplement the current reliance on north-west gas.

Second, he called for independent selling arrangements in the domestic market for future gas projects.

The DomGas Alliance, of which Alcoa is a member, has made similar calls, seeking to break-up the joint selling arrangements that apply to big gas projects like Gorgon.

“As new projects develop, there is a great opportunity for some of the world's largest oil and gas producers to compete for serious business in Western Australia, just as they do in other countries all around the world.

His third call was for government to ensure sufficient available gas for domestic use.

The Australian Petroleum Production and Exploration Association delivered an unusually blunt response, accusing Alcoa of putting its short-term commercial interests ahead of the greater good.

“Alcoa, a large industrial buyer of gas, seems more concerned about the short-term availability of natural gas supplies and the associated contractual provisions that suit their corporate position," APPEA WA director Tom Baddeley said.

“To confuse this with energy security, which covers the full range of issues associated with our nation's energy future, is disappointing."

Mr Baddeley believes concern over domestic gas supplies is misplaced.

He said new projects, such as Apache Energy's Devil Creek gas plant and Chevron's Gorgon development, could result in domestic gas supplies exceeding demand.

WA Business News columnist Tim Treadgold flagged this prospect in his Bystander column last month. While gas supplies may be tight over the next few years, a gas glut was predicted in WA by around the year 2014.

This week's Gas Supply and Emergency Management Committee report to the state government added further clarity to the debate around energy policy.

It fleshed out several proposals, including retrofitting gas power stations to use diesel, establishing diesel stockpiles, and using natural reservoirs to store gas closer to Perth.

The report was not comprehensive; it did not deal conclusively with all of the technical and commercial issues thrown up by its proposals.

However it did highlight the fact that measures to ensure energy security come at a price; a point that seemed to be lost in a lot of the discussions over recent years.

The more watertight the solution, the higher will be the price.

The community needs to continue the debate so that informed decisions can be taken.

It also needs to appreciate that giving free rein to market forces often goes a long way towards solving what initially appear to be intractable problems.


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