Gas security key to state’s Mondarra deal

THE state government is expected to co-sponsor a major expansion of the Mondarra gas storage facility near Dongara as a key plank in its strategy to guard against any repeat of the disruption caused by the 2008 Varanus Island explosion.

The government is understood to be in the final stages of negotiation with Mondarra’s owner to effectively create a state-owned strategic gas reserve for use in emergencies such as a Varanus-style supply disruption.

Mondarra, owned by Sydney-based APA Group, is a depleted gas field connected to both the Parmelia and Dampier-Bunbury gas pipelines, which currently stores up to three petajoules of gas for major users such as Verve Energy.

However, APA Group plans a four-fold boost in the facility’s storage capacity to 12 petajoules and a 10-fold increase in its supply capacity to 150 terajoules a day, equivalent to 15 per cent of the state’s total daily consumption, by early 2013.

The upgrade, likely to cost more than $400 million based on similar developments overseas, would enable WA to ride out a major supply disruption for up to three months.

WA taxpayers are expected to effectively underwrite the upgrade via a large volume storage contract between APA and Verve Energy.

Verve currently accounts for almost half the gas stored at Mondarra, and is believed to be negotiating to store several additional petajoules of gas at the facility.

Visiting Mondarra last week, Energy Minister Peter Collier declined to provide firm details of the government’s likely financial commitment at Mondarra, but said the project would play a major role in shoring up WA’s energy security.

Mr Collier noted that increased gas storage capacity was one of the key recommendations made by the Gas Supply and Emergency Management Committee he had established in 2008 to guard against any repeat of the Varanus disaster.

“This fits very neatly into that area, and we are working with regard to a negotiated commercial arrangement with APA and Mondarra,” Mr Collier said.

“I don’t want to comment too much in terms of commercial negotiations ... I’m confident that we’ll have a very positive outcome in the near future.”

Mr Collier declined to go into further detail, but confirmed that the government would support state utilities such as Verve increasing their back-up reserves of gas for use in an emergency.

“Without a doubt,” he said. “We are looking here (at) establishing criteria for gas security for all West Australians.”

Asked whether the initiative was a measure to create a de facto state-owned strategic gas reserve, Mr Collier said only that the government would be taking direct action to improve energy security.

“I don’t want to comment too much on the actual negotiated agreement at this stage, suffice to say that the state government wants to be a part of that process,” he said.

Mr Collier hinted the cost of the initiative would ultimately be reflected in gas tariffs.

“I don’t want to speculate on any potential increases in tariffs, but energy security is critical in my eyes and in the eyes of the government,” he said.

“There’s all sorts of pressures on gas tariffs and electricity tariffs right across the nation, and this is but part of it. But I think quite frankly, in terms of tariffs, we have to look at security of supply.

“Householders do understand; they want security of supply.”

Mr Collier said when the Varanus explosion wiped out a third of the state’s gas supplies in 2008, the government’s only option was to “tell people to turn off their gas heaters and to ask industry to reduce their consumption”.

“That is unpalatable to me as a minister, and to us as a government. We need to have a long-term solution,” he said at Mondarra last week.