The Economic Regulation Authority has added to concerns about the supply of gas to the domestic market in WA, concluding that problems are likely to arise over the next five to seven years.
The Economic Regulation Authority has added to concerns about the supply of gas to the domestic market in WA, concluding that problems are likely to arise over the next five to seven years.
Its concerns are outlined in a discussion paper released today, which followed consultation with a wide range of industry participants.
"It is likely, therefore, that there could be potential problems looming in the supply of domestic gas to the WA market at various periods over the next five to seven years," the ERA said.
Its report also disclosed that the North West Shelf Gas joint venture had recently encountered technical problems.
"NWSG recently advised the Authority that the upgrading program currently being undertaken on its two domestic gas processing trains had run into technical difficulties," the report said.
"The upgrading program had been intended to increase the capacity of these trains by circa 100 TJ/day to accommodate growing demand and align with pipeline expansions."
The ERA, which is chaired by former chamber of commerce and industry of WA chief executive Lyndon Rowe, said there was restricted capability to further upgrade these trains once this expansion was completed.
"The North West Shelf Venture (NWSV), the owner of the gas processing facilities, would require an additional domestic gas processing train to meet any further demand for gas."
Other potential sources of additional gas include Chevron's Gorgon project, Woodside's Pluto project, BHP Billiton's Macedon project and the Varanus Island processing hub, which is used by producers including Santos and Apache Energy.
However all of these options are subject to commercial and geological uncertainty.
The ERA said the earliest that gas from the Pluto project was likely to reach the domestic market was 2018.
"Associated with concerns about the gas supply, stakeholders in the Authority's consultation process expressed considerable concern about the steep rise in the gas price for new gas contracts over the period since mid-2006," the report said.
"Information from stakeholders indicates that gas prices in the Western Australian market have more than doubled in the 12 month period since early 2006 to a current level of around $5.50 to $6/GJ.
"By contrast, on the East Coast the availability of coal seam methane has driven gas prices down from around $3.50/GJ to about $3/GJ in Victoria and NSW and about $2.50 /GJ in Queensland."
The ERA report also highlighted concerns regarding the operation of the Dampier to Bunbury natural gas pipeline.
"There was a consistent concern expressed by a number of shippers and potential shippers that Alinta's position as a part owner of the DBNGP would enable it, in conjunction with DBP, to inhibit competition in the downstream energy market in order to protect its position as a major energy retailer," the report said.
"No specific examples were provided to support this concern and the Authority is not in a position to comment on the validity of the concerns expressed."
The report said a significant degree of concern was also expressed by shippers and potential shippers over the Standard Shipper Contract, which has a minimum 15 year contract period.
